Gold prices retreat as markets look past 50 bps Fed rate cut

Investing.com– Gold prices moved in a flat-to-low range in Asian trade on Thursday, and were nursing overnight losses after less dovish signals from the Federal Reserve offset some optimism over a bumper rate cut. 

Strength in the dollar pressured bullion prices, as the greenback rose sharply on bets that U.S. interest rates may not fall as much as expected in the medium to long term. 

The yellow metal also saw some profit-taking after hitting record highs in the run-up to Wednesday’s Fed decision. 

Spot gold rose 0.1% to $2,561.30 an ounce, while gold futures expiring in December fell 0.5% to $2,585.65 an ounce by 00:24 ET (04:24 GMT). Spot prices were nursing some overnight losses, and pulled back further from recent record highs. 

Fed cuts rates by 50 bps, but offers less dovish outlook 

The Fed cut its benchmark rate by 50 basis points- the upper end of market expectations- in its first rate cut since the COVID-19 pandemic in 2020. The central bank also announced the beginning of an easing cycle. 

Fed Chair Jerome Powell quelled some concerns over a slowing economy after the outsized rate cut, stating that risks between rising inflation and a softer labor market were evenly balanced. Powell flagged the prospect of more rate cuts, with markets pricing in a total of 125 bps worth of rate cuts by the year-end. 

But Powell also said the Fed had no intention of returning to an ultra-low rate environment as seen during COVID-19, and said the Fed’s neutral rate will be much higher than seen previously. 

His comments presented a higher outlook for rates in the medium-to-long term, and somewhat diminished optimism over Wednesday’s cut. 

Still, the prospect of lower rates bodes well for non-yielding assets such as gold, given that it decreases the opportunity cost of investing in bullion. 

Other precious metals rose on Thursday, but were also nursing overnight losses. Platinum futures rose 0.5% to $978.15 an ounce, while silver futures rose 0.2% to $30.755 an ounce.

Copper prices rise, China rate decision awaited 

Among industrial metals, copper prices advanced on Thursday amid expectations of more stimulus measures from top importer China, with an interest rate decision from the country due on Friday. 

Benchmark copper futures on the London Metal Exchange rose 0.4% to $9,425.50 a ton, while one-month copper futures rose 0.6% to $4.2970 a pound.

The People’s Bank of China is widely expected to keep its benchmark loan prime rate unchanged on Friday. But persistent signs of economic weakness in the country are expected to eventually spur further cuts in the LPR.