© Reuters.
Investing.com — Gold prices extended losses in Asian trade on Wednesday, as hawkish signals from Federal Reserve officials raised more doubts about early interest rate cuts by the central bank, while a rebound in the dollar also dragged prices lower.
Among industrial metals, copper prices approached their lowest levels in a month after moderate economic growth numbers from China, the largest importer.
Gold prices fell from $2,050 an ounce on Tuesday after Federal Reserve Governor Christopher Waller signaled a cautious approach to interest rate cuts and said recent resilience in the US economy would likely delay any potential cuts.
His comments sent the interest rate index to a one-month high, while also sparking a sharp rebound in Treasury yields, with them crossing the 4% mark.
The prospect of higher US interest rates for a longer period has largely offset recent safe-haven demand for gold, and has seen traders shift away from the yellow metal towards the dollar.
February futures contracts were down 0.4% at $2,019.70 an ounce, while February futures contracts were down 0.4% at $2,022.90 an ounce by 00:20 ET (05:20 GMT). Both instruments fell more than 1% on Tuesday.
More US economic signals await as traders scale back bets on interest rate cuts in March
Markets are now focused squarely on the upcoming data for December, which is due later on Wednesday. Any signs of strength in the US economy, especially consumer spending, give the Fed more room to keep interest rates high for longer.
Traders were seen slightly trimming their bets on a March interest rate cut by the central bank, according to . Markets see a 62.8% chance of a 25 basis point rate cut, down from 66.1% the day before.
Higher rates increase the opportunity cost of investing in bullion, and limit capital flows into gold as traders seek better returns in debt. This trend has affected the yellow metal over the past two years.
While gold saw some safe-haven demand amid increasing military actions in the Middle East, this was also offset by traders instead looking for a safe haven in the dollar.
However, the yellow metal will benefit from the eventual decline in US interest rates this year.
Copper sinks as China’s GDP appears disappointing
Futures contracts expiring in March fell 0.5 percent to $3.7492 a pound, within sight of their weakest levels since early December.
The red metal was exposed to a new wave of selling after data showed China growing slightly less than expected in the fourth quarter.
Although this growth still exceeds the government’s 5% target for 2023, it was mainly driven by a lower base of comparison from 2022. Other weak indicators for December also set a weak tone for China heading into 2024.
Copper prices have come under renewed pressure in recent weeks, as markets fear deteriorating economic conditions in China will erode demand. The decline in global demand for electric vehicles also cast a shadow over the outlook for copper demand.
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