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Market Analysis

Gold Prices Near Record Highs as Rate Cut Speculations Increase
Amos Simanungkalit · 138.1K Views

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Gold prices climbed in Asian trading on Tuesday, nearing new highs due to growing expectations that the Federal Reserve might start cutting rates from September.

However, gold's gains were tempered by the dollar's strength, driven by increased speculation that Donald Trump will secure a second presidential term, which bolstered the greenback.

Spot gold increased by 0.2% to $2,427.77 per ounce, while August gold futures rose 0.1% to $2,432.30 per ounce by 00:46 ET (04:46 GMT).

Gold Nears Record High as Rate Cut Expectations Rise

Spot prices were now less than $30 away from a record high of approximately $2,450 reached in late May.

The recent rise in gold was mainly driven by heightened expectations that the Fed will start cutting rates by September, following weak inflation data and somewhat dovish signals from the central bank.

Fed Chair Jerome Powell stated on Monday that the bank had increased confidence that inflation was declining. Although he did not explicitly signal a rate cut, markets interpreted his comments as indicating that a cut was imminent.

Traders have almost entirely ruled out the possibility of the Fed maintaining steady rates in September and are now pricing in nearly a 90% chance of a 25 basis point cut, according to CME Fedwatch.

Other precious metals showed varied performances on Tuesday, with platinum futures dropping 0.3% while silver futures rose 0.2%.

Dollar's Strength Limits Gold's Gains, Trump Under Scrutiny

A rebound in the dollar hindered gold's progress, particularly as the greenback recovered from an over one-month low this week.

The dollar's support came largely from increased speculation that Trump will win a second term. This followed a failed assassination attempt on the former president, which significantly boosted his popularity, putting him ahead of Joe Biden in the presidential race.

Trump is anticipated to implement more protectionist trade policies, potentially increasing inflation and supporting the dollar.

Copper Prices Steady Amid China Concerns

Among industrial metals, copper prices remained flat as the outlook was clouded by growing concerns over China.

Benchmark copper futures on the London Metal Exchange fell 0.1% to $9,795.50 per tonne, while one-month copper futures rose 0.2% to $4.521 per pound.

Weaker-than-expected GDP data from China raised doubts about an economic recovery in the country, which could negatively impact its copper demand.

Additionally, a Trump presidency could pose more trade challenges for China, further affecting its economy.

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Paraphrasing text from "Investing" all rights reserved by the original author.

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