Gold prices found stability on Thursday following a decline in the previous session, as the minutes of the Federal Reserve’s June meeting revealed support for additional rate hikes. This outlook from policymakers cast a gloomy shadow over the metal markets.
Wednesday’s losses eroded much of gold’s recent recovery, as the precious metal struggled to rebound from a three-month low reached in June.
Despite worsening economic conditions, investors have predominantly turned to the dollar as a preferred safe haven due to mounting expectations that the Fed will continue to raise interest rates in the upcoming months.
At 20:13 ET (00:13 GMT), spot gold experienced a marginal 0.1% increase, reaching $1,917.58 per ounce, while gold futures dipped 0.2% to $1,924.15 per ounce. Both instruments had witnessed losses of 0.4% to 0.6% on Wednesday.
Fed Minutes Indicate Expectations for More Rate Hikes, Putting Pressure on Gold
The minutes from the Fed’s June meeting revealed that nearly all members of the central bank endorsed the notion of additional interest rate hikes this year, citing persistent inflation and unexpected labor market strength.
Although the Fed had maintained rates in June, it had projected a minimum 50 basis point (bps) increase in rates for this year. The rise in interest rates negatively impacts non-yielding assets like gold, as it raises the opportunity cost of holding such assets.
Wednesday’s losses caused spot gold to retreat from the $1,925 to $1,935 per ounce range, which analysts had identified as a support level for the precious metal. Gold is now once again testing the $1,900 support level.
The Fed minutes prompted traders to heighten their expectations for a rate hike later in July, with the market currently pricing in a 90.5% probability of a 25 bps rate increase during a late-July meeting.
Attention has now turned to the crucial U.S. nonfarm payrolls data scheduled for release on Friday, which will provide further insights into the labor market. This data is expected to influence the Fed’s decision on rates in July.
Copper Maintains Stability Amid China Concerns
Copper prices steadied on Thursday after experiencing declines over the past two sessions. The potential for deteriorating economic conditions, coupled with rising rates, has cast a shadow on the demand outlook for this industrial metal.
Copper futures remained unchanged at $3.7615 per pound, following a nearly 1% decline over the past two sessions.
Weaker economic data from China, a major importer of copper, combined with the potential escalation of the Sino-U.S. trade war, has further dampened the outlook for copper. China recently imposed restrictions on the export of key chipmaking materials to the United States, raising concerns about potential retaliatory measures.
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