TLDR
- Gold declined 0.4% to $3,986.10 per ounce as the U.S. dollar reached its highest level in three months against other major currencies.
- Markets reduced expectations for a December Federal Reserve rate cut after Chair Jerome Powell said the decision is “not a foregone conclusion.”
- Higher interest rates and a stronger dollar make gold less appealing since the metal produces no income for holders.
- Other metals fell with silver down 1.5% to $47.315, platinum declining 1.3% to $1,557.85, and copper dropping 1.3% to $10,705.20 per ton.
- Concerns about U.S.-China trade relations over chip exports continue despite recent diplomatic progress between the two nations.
Gold prices moved lower during Asian market hours on Tuesday as the U.S. dollar extended its recent rally and questions mounted about the Federal Reserve’s interest rate trajectory. Spot gold decreased 0.4% to $3,986.10 per ounce while U.S. Gold Futures dropped 0.5% to $3,994.30.
The yellow metal lost its grip on the $4,000 per ounce level. The decline occurred as the greenback posted a three-month high against a basket of major currencies on Monday.
When the dollar appreciates, gold becomes costlier for buyers holding foreign currencies. This price dynamic typically suppresses international demand and creates selling pressure.
Powell’s Comments Shift Rate Cut Timeline
Federal Reserve Chair Jerome Powell delivered remarks last week that altered market sentiment about monetary policy. He indicated that a rate reduction in December was “not a foregone conclusion.”
Traders responded by reducing their bets on additional easing before year end. The dollar benefited from this shift as higher rates support currency values.
Gold struggles when borrowing costs remain elevated. Investors often prefer yield-generating assets over the non-interest-bearing metal when rates stay high.
Multiple Federal Reserve officials gave speeches on Monday with contrasting views about economic conditions. Some policymakers highlighted persistent inflation concerns that warrant continued vigilance.
Others noted softening trends in employment data. This lack of consensus among Fed officials created additional uncertainty about the central bank’s policy path.
Precious and Industrial Metals Follow Gold Lower
The dollar’s advance affected prices across the metals complex on Tuesday. Silver Futures fell 1.5% to $47.315 per ounce as the precious metals sector faced broad selling.
Platinum Futures lost 1.3% to $1,557.85 per ounce. The pressure extended beyond precious metals into industrial commodities.
Copper prices declined across global markets. London Metal Exchange benchmark Copper Futures slipped 1.3% to $10,705.20 a ton.
U.S. Copper Futures also fell 1.3% to $4.99 a pound. Currency strength affects all dollar-denominated commodities regardless of their industrial or investment use.
Trade Tensions Provide Limited Support
Market analysts note that gold’s decline may have natural limits despite current headwinds. Geopolitical concerns continue to underpin some safe-haven demand for the metal.
U.S.-China relations showed improvement recently with diplomatic engagement between the countries. These positive developments initially boosted risk appetite across financial markets.
Fresh concerns about technology export restrictions have emerged. Washington’s approach to advanced semiconductor exports has reignited trade worries between the world’s two largest economies.
Gold was trading at $3,986.10 per ounce as of 01:58 ET (06:58 GMT) on Tuesday. Market participants are watching for additional Federal Reserve commentary that could clarify the timeline for potential rate adjustments.
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