Gold Steadies After Falling from Record Highs Due to Interest Rate Uncertainty

On Tuesday, gold prices steadied in Asian trading after a recent decline from record highs. The decline was caused by expectations of smaller interest rate cuts by the U.S. Federal Reserve. The market is focused on upcoming inflation data and signals from the Federal Reserve, which are expected to guide future interest rate decisions.

Gold's Rally Slows as Interest Rate Expectations Shift

Gold reached record highs in September after the Federal Reserve cut interest rates by 50 basis points, starting a new round of monetary easing. However, concerns about the pace of future rate cuts have since caused gold prices to fall. Strong U.S. economic data, including a better-than-expected nonfarm payrolls report, has reduced expectations for more aggressive rate cuts. This shift in outlook has contributed to the decrease in gold prices.

On Tuesday, spot gold was priced at $2,642.86 per ounce, while December gold futures dropped 0.2% to $2,661.70 per ounce. The strengthening U.S. dollar, which recently hit a seven-week high, also weighed on gold prices. A stronger dollar makes gold more expensive for international buyers.

Traders believe there is an 81% chance of a 25 basis point interest rate cut in November. A smaller portion of the market still expects a 50 basis point cut. Investors are now awaiting the release of the minutes from the Federal Reserve's September meeting for more information on the bank's future plans.

While lower interest rates usually support gold and other non-yielding assets, a slower pace of rate cuts reduces their short-term attractiveness. Traders will also be paying close attention to U.S. consumer price index data due later this week, as it will help shape the Federal Reserve's outlook.

Other Precious Metals Decline

Platinum and silver prices also dropped on Tuesday. Platinum futures fell by 0.8% to $977.50 per ounce, while silver futures declined by 1.1% to $31.66 per ounce. Like gold, these metals have been affected by the stronger U.S. dollar and changing expectations about interest rate cuts.

Copper Prices Drop as Chinese Stimulus Disappoints

In the industrial metals sector, copper prices fell sharply as Chinese markets reopened after a week-long holiday. Copper had initially risen on optimism following China's announcement of stimulus measures in late September. However, copper prices dropped after details about the implementation of these measures were seen as disappointing by investors.

Benchmark copper futures on the London Metal Exchange fell 1.5% to $9,800.50 per ton, and one-month futures declined by 1.9% to $4.4697 per pound. China, the largest consumer of copper in the world, had introduced a series of stimulus plans to support its slowing economy, but the lack of strong execution has reduced market confidence, leading to lower copper prices.

Market Outlook: Focus on Federal Reserve and China

This week, traders will closely watch two key factors: the Federal Reserve’s interest rate policy and China’s ability to implement its stimulus measures effectively. The Federal Reserve's data-driven approach keeps the possibility of future rate cuts open, but the pace of these cuts will determine the short-term performance of metals like gold.

For copper, much will depend on China’s success in boosting demand through its stimulus measures. If China fails to deliver, copper prices may face further declines, but better implementation of the stimulus could provide some support to the market.

In the short term, both precious and industrial metals markets will remain sensitive to developments in the U.S. and Chinese economies, as these two nations are major drivers of global commodity prices.