Gold prices pull back further from record highs; Fed cuts in focus

Investing.com-- Gold prices moved little in Asian trade on Wednesday after falling sharply from record highs this week, with traders now seeking more cues on when the Federal Reserve will begin trimming interest rates.

A softer-than-expected JOLTs job openings reading for October pushed up some hopes over a cooling labor market. But focus remained squarely on an upcoming nonfarm payrolls reading for November, due this Friday.

The yellow metal had started the week at record highs of over $2,100 an ounce, boosted by seemingly less hawkish comments from Fed Chair Jerome Powell, as well as increased safe haven demand following a spike in Middle East tensions. 

But it had then retreated sharply from the record peaks, as uncertainty over the Fed helped the dollar recover some lost ground. Gold prices were still trading well above the $2,000 an ounce level.

Spot gold rose 0.1% to $2,021.61 an ounce, while gold futures expiring February rose 0.1% to $2,039.00 an ounce by 00:08 ET (05:08 GMT). 

Markets uncertain over Fed rate cuts 

While investors were convinced that the Fed will raise interest rates no further, they remained uncertain over just when the central bank planned to begin trimming rates.

Fed Funds futures prices show traders pricing in an over 50% chance the Fed could begin trimming rates by as soon as March 2024. Futures also indicated an over 90% chance the Fed will keep rates on hold in December. 

But the central bank has given no such indication, and has stated that rates will largely remain higher for longer, barring further, pronounced declines in inflation. U.S. inflation is still well above the Fed’s annual 2% target, while the job market remains relatively strong.

The U.S. economy also remained largely resilient in the third quarter, amid steady consumer spending. 

Uncertainty over the Fed’s plans for rate cuts kept further gains in gold somewhat doubtful, given that high interest rates push up the opportunity cost of investing in the yellow metal. 

But signs of deteriorating economic conditions across the globe- particularly in China and the euro zone- could still drive some safe haven flows into gold. 

Copper recovers after China fears spur two days of losses 

Among industrial metals, copper prices rose on Wednesday, recovering from a two-day rout spurred by increased concerns over top importer China.

Copper futures expiring in March rose 0.6% to $3.8068 an ounce, after losing nearly 4% in the past two sessions.

Concerns over China surged this week after ratings agency Moody’s flagged a potential downgrade to the country’s credit rating, citing increased risks from a property market downturn, as well as a lack of clear policy support from Beijing. 

The warning, coupled with signs of continued economic weakness in China, pushed up concerns over declining copper demand in 2024.