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Gold Prices Hold Steady as Dollar Strengthens on Prospects of Fewer Rate Cuts

Gold prices remained relatively unchanged during Asian trading hours on Friday, as the dollar saw a resurgence, fueled by indications of potentially fewer interest rate cuts in the United States. This renewed strength in the dollar tempered the optimism stemming from a slight moderation in inflation.

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Despite posting some gains over the week, gold continued to grapple with a significant decline from its recent record highs, a trend largely attributed to the prevailing high interest rate environment.

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Spot gold inched up by 0.1% to $2,305.23 per ounce, while August gold futures saw a similar uptick of 0.1%, reaching $2,320.15 per ounce as of 00:56 ET (04:56 GMT).

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The outlook for elevated interest rates weighed heavily on gold and broader metal prices, with recent sessions witnessing retreats following the Federal Reserve’s announcement of a single anticipated rate cut in 2024, a departure from earlier expectations of three cuts. Although gold saw some upward movement following softer-than-anticipated consumer price index data, sentiment eventually shifted back in favor of the dollar following the Fed’s revised forecast.

Despite weaker-than-expected producer price index data, the dollar mounted a rebound, with Treasury yields also bouncing back from earlier lows this week. The prospect of prolonged higher interest rates casts a shadow over gold and other metals, as it enhances the opportunity cost of investing in non-yielding assets, a sentiment that kept other precious metals trading within a narrow range on Friday. Platinum futures edged up by 0.3% to $957.80 per ounce, while silver futures dipped by 0.2% to $28.992 per ounce, with both metals poised for subdued weekly performances.

Meanwhile, in the realm of industrial metals, copper prices saw marginal gains on Friday but faced a lackluster performance for the week amid pressure from a resurgent dollar. Benchmark copper futures on the London Metal Exchange rose by 0.3% to $9,824.0 per tonne, while one-month copper futures ticked up by 0.2% to $4.4945 per pound.

Sentiment towards China took a hit as the European Union followed the United States in imposing tariffs on Chinese electric vehicle imports, presenting challenges for the rapidly expanding industry and posing potential headwinds for copper demand, given the significant role of electric vehicles as consumers of the red metal. Additionally, escalating trade tensions between the world’s largest economies have raised concerns about the possibility of a renewed trade war.

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