Gold prices rise after bumper Fed rate cut; copper upbeat on China stimulus

Investing.com– Gold prices rose in Asian trade on Friday as the dollar fell following an outsized interest rate cut by the Federal Reserve, with markets cheering the prospect of further reductions in rates.  

Among industrial metals, copper prices rose as media reports said top importer China was considering more supportive measures for the property market, after the People’s Bank left benchmark lending rates unchanged. 

Gold had initially logged a negative reaction to the rate cut on Wednesday, given that Fed Chair Jerome Powell also provided a less dovish outlook for long-term rates.

But markets cheered the prospect of lower rates in the near-term, which dented the dollar and spurred flows into risk-driven assets. 

Spot gold rose 0.3% to $2,593.31 an ounce, while gold futures expiring in December rose 0.2% to $2,618.40 an ounce by 00:43 ET (04:43 GMT). 

Safe haven demand for gold was also aided by worsening tensions in the Middle East, after Israel allegedly exploded electronic devices used by Hezbollah, drawing vows of retaliation. 

Gold heads for weekly gains as Fed begins easing cycle 

Spot prices were set to add about 0.6% this week, as the Fed kicked off an easing cycle that could see interest rates fall by as much as 125 basis points this year. The central bank cut rates by 50 bps- the upper end of market expectations.

While Fed Chair Jerome Powell did signal that neutral rates will be higher than those seen in the past, traders welcomed the prospect of sharp decreases in rates in the near term.

Citi analysts said the Fed could cut rates by 50 bps again in November.

The Fed’s outsized cut also spurred some concerns over slowing U.S. economic growth, keeping safe haven demand for gold in play.

Lower rates bode well for gold, given that they reduce the opportunity cost of investing in the yellow metal. 

Other precious metals were flat, and were mostly lagging gold this week. Platinum futures steadied at $989.55 an ounce, while silver futures fell 0.3% to $31.340 an ounce.

Copper up on China property stimulus hopes 

Benchmark copper futures on the London Metal Exchange rose 0.5% to $9,582.50 a ton, while one-month copper futures rose 0.7% to $4.3788 a pound. 

Gains in copper came as Bloomberg reported top importer China was considering removing major restrictions on home purchases to revive the housing market- a move that could provide a shot in the arm for the ailing property sector. 

But the People’s Bank of China kept its benchmark loan prime rate unchanged on Friday, disappointing some traders hoping for more rate cuts to bolster sluggish economic growth in the country. 

Calls for more stimulus from Beijing grew in recent weeks, especially following a string of weak economic readings for August.