Gold prices pause losses, but remain pinned below $2,000 by rate woes

Investing.com-- Gold prices moved little in Asian trade on Thursday, remaining below key support levels as the prospect of higher for longer U.S. interest rates continued to diminish the yellow metal’s appeal. 

Bullion prices took some relief from mild losses in the dollar, which consolidated in overnight trade after racing to three-month highs earlier this week. The greenback is now likely to see more near-term gains, as traders began further scaling back expectations for early rate cuts by the Federal Reserve.

A slew of Fed officials also warned that the central bank will keep rates higher if inflation remains sticky- a scenario that bodes poorly for gold. Higher rates push up the opportunity cost of investing in bullion.

Spot gold was flat at $1,992.27 an ounce, while gold futures expiring in April fell slightly to $2,003.70 an ounce. Both instruments remained pinned at two-month lows, and were close to testing support levels around $1,970 and $1,980 an ounce. 

Markets scale back May, June rate cut bets 

The CME Fedwatch tool showed that traders were steadily scaling back expectations for rate cuts in May and June, amid growing uncertainty over when the Fed will begin trimming interest rates.

While the central bank has signaled that it will eventually cut interest rates this year, it has offered scant cues on the potential timing and scale of the cuts. So far, the Fed has signaled a largely data-driven approach to rates, and recent data has given little indication that rate cuts will come early. 

U.S. retail sales, jobless claims data due later in the day is now in focus for more cues on the world’s largest economy. Producer price index inflation data for January, due on Friday, is also expected to provide more cues on the path of inflation. 

Several more Fed officials, including Christopher Waller and Mary Daly, are set to speak in the coming days, offering up more cues on monetary policy.

A sharp rise in U.S. interest rates had limited any major gains in gold over the past two years, even as deteriorating economic conditions across the rest of the globe spurred some demand for safe havens. This trend is expected to continue in the near-term. 

Copper prices flat, weak economic readings cloud outlook

Among industrial metals, copper prices moved little on Thursday and were set for a subdued weekly performance, as a slew of weak economic readings from across the globe clouded the outlook for the red metal.

Copper futures expiring in March rose 0.1% to $3.7067 a pound, seeing some relief as the dollar retreated from three-month peaks.

But weak GDP readings from Japan and the euro zone kept concerns over slowing economic growth largely in play, as traders feared the prospect of weaker demand for copper this year.