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Gold Prices Retreat Amid Fewer Expected Rate Cuts

In Asian trading on Thursday, gold prices experienced a decline, hovering near recent lows as the Federal Reserve revised down its forecast for interest rate cuts this year, presenting challenges for the yellow metal.

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Despite a decline in the dollar overnight due to a softer consumer price index reading, gold still faced losses. However, the greenback stabilized on Thursday as markets absorbed a more hawkish stance from the Fed.

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Spot gold fell by 0.7% to $2,309.69 an ounce, while gold futures expiring in August slid by 1.2% to $2,325.60 an ounce by 00:45 ET (04:45 GMT).

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Impact of Fed’s Outlook on Precious Metals

The broader metal market weakened on Thursday following remarks from Fed Chair Jerome Powell, who stated that the central bank anticipated only one interest rate cut this year, down from previous expectations of three cuts. Some policymakers even advocated for no rate cuts in light of persistent inflation, with the Fed also revising its inflation forecast for the year.

The prospect of sustained high interest rates poses challenges for gold and other precious metals, as it increases the opportunity cost of investing in non-yielding assets. This factor has kept any potential record highs in gold prices short-lived over the past year.

Gold was further affected by indications that some major central banks, particularly the People’s Bank of China, halted purchases of the yellow metal in May. However, Citi analysts suggested in a recent note that gold could potentially reach as high as $3,000 an ounce over the next 12 months.

Declines Across Precious and Industrial Metals

Other precious metals also experienced declines on Thursday. Platinum futures fell by 1.3% to $951.55 an ounce, while silver futures dropped by 3.3% to $29.262 an ounce.

Industrial metals also registered losses, with copper prices declining due to the bleak economic outlook resulting from the expectation of sustained high interest rates. Additionally, concerns over potential stimulus measures in China, a major importer, weighed on sentiment toward copper, as recent economic indicators presented a mixed recovery in China’s economy.

Benchmark three-month copper futures on the London Metal Exchange fell by 1.1% to $9,837.50 a tonne, while one-month copper futures declined by 0.5% to $4.5095 a pound.

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