Gold prices experienced a slight drop in Asian trade on Wednesday, remaining around key levels as investors awaited more information on the U.S. monetary policy from upcoming reports and Federal Reserve speakers. The yellow metal had re-attained the $2,000 level on Tuesday as the dollar and U.S. Treasury yields subsided after a recovery rally. However, the recent hawkish signals from Fed speakers has limited any significant gains, leaving gold somewhat stable amid fears of an economic slowdown.
On Wednesday, spot gold decreased by 0.1% to $2,002.76 an ounce, while gold futures fell 0.2% to $2,015.00 an ounce by 22:01 ET (02:01 GMT). This is after two days of steep losses in both instruments. Investors are keenly waiting for reports and speeches from the Federal Reserve, starting with the Beige Book economic report set to be released later in the day. Fed Governors Christopher Waller and Lisa Cook are also scheduled to speak on Thursday and Friday, respectively.
Fed officials' hawkish comments and some signs of resilience in the U.S. economy have raised concerns that U.S. interest rates may increase more than expected. This has led to an 85% chance of a 25 basis point hike in May, followed by a 19% chance of a similar move in June, as shown by Fed Fund futures prices. The possibility of increased interest rates is a cause for concern for precious metals and other metals as it increases the opportunity cost of holding non-yielding assets. However, they have benefited from increased safe-haven demand amid concerns that rising interest rates could lead to a reduction in economic growth.
Other precious metals such as platinum and silver futures fell slightly on Wednesday, while copper prices also experienced a drop despite better-than-expected Chinese economic growth data. Although China's economy bounced back in the first quarter of 2023, there are concerns over commodity demand due to continued weakness in the manufacturing sector, particularly for the world's largest copper importer.
