Gold slips below $2,050 as dollar rebounds amid Fed uncertainty

Investing.com-- Gold prices rose slightly in Asian trade on Thursday, but hovered below key levels as the dollar rebounded on growing doubts over exactly when the Federal Reserve will begin trimming interest rates. 

Anticipation of key nonfarm payrolls data also kept investors largely wary of buying outside the dollar, which presented more headwinds to non-yielding assets such as gold. 

The yellow metal saw a strong run-up in the last few days of 2023, amid growing optimism that the Fed could begin cutting rates by as early as March 2024.

But the metal was hit with some profit-taking at the beginning of the new year, while traders also somewhat trimmed expectations on early rate cuts from the central bank.

Spot gold rose 0.1% to $2,043.68 an ounce, while gold futures rose 0.4% to $2,050.95 an ounce by 00:24 ET (05:24 GMT). Both instruments tumbled about 1% in the first two days of 2024. 

Fed minutes give little clarity on rate cut timing; Payrolls awaited 

Gold deepened its losses on Wednesday, while the dollar extended a rebound after the minutes of the Fed’s December meeting gave few cues on when the bank would begin trimming rates this year.

While most Fed officials saw interest rates falling by as much as 75 basis points in 2024, there appeared to be little consensus over the timing of the rate cuts.

The central bank acknowledged the progress it had made towards bringing down inflation with its rate hikes over the past year. But several policymakers still noted the need for tight monetary policy in the near-term, citing increased uncertainty over the U.S. economic outlook.

While the U.S. economy is cooling, inflation still remains above the Fed’s 2% annual target. The labor market is also running relatively strong, with nonfarm payrolls data due this Friday expected to provide more cues on that front.

The CME Fedwatch tool showed trades pricing in a 65% chance for a 25 basis point rate cut in March, down from the more than 70% chance seen at the beginning of the week.

While gold did see some weakness in the beginning of 2024, it was still sitting on an over 10% gain through 2023. The yellow metal is expected to benefit from easing interest rates this year, given that high rates push up the opportunity cost of buying bullion. 

Copper dips on more Chinese headwinds 

Among industrial metals, copper prices fell further on Thursday, extending recent losses amid pressure from the dollar and renewed concerns over top importer China.

Copper futures expiring in March fell 0.5% to $3.8502 a pound.

The red metal was hit with a fresh wave of selling after Fitch downgraded the credit ratings of four major Chinese state-backed asset managers, citing concerns over China’s property market and inconsistent government support.

The move further dented sentiment towards China, raising concerns that worsening economic conditions in the country could dent its appetite for copper.