Gold falls below $2,300 as markets brace for hawkish Fed



Investing.com – Gold prices fell in Asian trading on Wednesday, extending sharp losses overnight, sending prices below key support levels as markets braced for a possible hawkish signal from the Federal Reserve later in the day.

Gold fell further from its all-time high set in April as global geopolitical tensions eased and safe-haven demand waned, leaving it vulnerable to interest rate headwinds.

It fell 0.1% to $2,285.19 an ounce, while gold with June expiry fell 0.3% to $2,295.25 an ounce at 23:50 ET (03:50 GMT). Spot prices fell below the closely watched $2,300 an ounce level on Tuesday, with gold likely to face more losses ahead of more clues on U.S. interest rates.

Fed meeting awaits, Powell turns hawkish

The focus is now entirely on Wednesday, two days later, when the central bank is expected to keep interest rates on hold.

But Fed Chairman Jerome Powell is widely expected to offer a hawkish outlook, especially after a series of higher-than-expected inflation data. Stronger-than-expected first-quarter data on Tuesday further reinforced that view.

The strong inflation data gradually led traders to rule out expectations of an early interest rate cut by the Federal Reserve. The central bank is currently expected to only start cutting interest rates in September, if at all.

Higher interest rates in the long term are bad for gold because they increase the opportunity cost of investing in gold. Over the past two weeks, waning expectations of interest rate cuts have dragged gold prices back from record highs.

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Other precious metals also fell on Wednesday as the dollar surged to near six-month highs. It fell 0.2% to $943.95 an ounce and fell 0.2% to $26.598 an ounce.

Copper prices retreat from two-year highs after strong performance in April

Among industrial metals, copper prices retreated from two-year highs on pressure from a stronger dollar, while April's strong gains also brought some profit-taking.

The London Metal Exchange fell 0.8% to $9,910.0 a ton and fell 0.3% to $4.5285 a pound.

Both contracts surged between 14% and 16% in April on expectations of tighter supplies due to more sanctions on Russia and output cuts at China's major refineries.

But concerns about slowing economic growth – especially if interest rates remain elevated for an extended period – could weaken copper prices in the short term.





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