Gold Prices Rise in Asian Trade on Rebound from One-Month Lows
Gold prices in Asia saw a rebound today, extending a recovery from one-month lows after recently breaking below a key support level. However, concerns over potentially higher US interest rates kept prices largely rangebound. In February, the precious metal briefly fell below $2,000 an ounce as stronger-than-expected US inflation readings diminished expectations of early interest rate cuts by the Federal Reserve. Although gold has recovered above the support level in the past two sessions, it has remained within a trading range of $2,000 to $2,050 an ounce since mid-January. Persistent US inflation and a hawkish outlook for interest rates have hindered gold's progress.
Gold rose by 0.3% to $2,019.95 an ounce, while gold futures expiring in April rose by 0.4% to $2,031.15 an ounce. The strength of the US dollar has weighed on gold, with the greenback near a three-month high following stronger-than-expected inflation data on Friday. This follows yet another positive inflation reading for January. Sticky inflation reduces the urgency for the Federal Reserve to immediately ease monetary policy, as several officials have recently warned. Investors are now looking to the Federal Reserve for further guidance on interest rates. Higher interest rates for an extended period do not bode well for gold, as they increase the opportunity cost of investing in the precious metal. This sentiment has also affected other precious metals, with silver falling by 0.3% and platinum falling by 1.3%.
Meanwhile, copper prices fell today after a strong performance last week based on hopes of improved economic conditions in China, the world's leading copper importer. Copper futures expiring in March dropped by 0.4% to $3.8083 a pound, following a surge of over 4% in the previous week. Data indicating increased consumer spending in China during the Lunar New Year holiday has fueled optimism for a broader economic recovery in the country.
As investors closely watch the developments surrounding US interest rates and the global economic recovery, gold prices continue to be influenced by these factors, maintaining a rangebound trading pattern.
Analyst comment
Positive news: Gold prices rose in Asian trade, rebounding from one-month lows and breaking above a key support level. However, fears of higher U.S. rates kept prices rangebound. Gold futures and silver prices fell slightly.
As an analyst, the market for gold is likely to remain rangebound between $2,000 and $2,050 an ounce due to sticky U.S. inflation and a hawkish outlook for interest rates. Focus will be on the Federal Reserve for more cues on interest rates. Higher interest rates pose a challenge for gold, while hopes of improving economic conditions in China may support copper prices.
