Gold prices drop from record highs as concerns about interest rates continue
Gold prices fell in Asian trade on Tuesday, retreating from record highs as easing uncertainty over Iran reduced safe haven demand for the yellow metal, while concerns over U.S. interest rates persisted.
Among industrial metals, a rally in copper to record highs also reversed course on Tuesday amid some profit-taking, as traders assessed the red metal’s potential for the year.
Gold surged to a record high on Monday, benefiting from increased safe haven demand due to fears of geopolitical instability in the Middle East following the death of Iran’s President in a helicopter crash. However, the immediate impact of his death remained unclear.
Spot gold fell 0.5% to $2,413.77 an ounce, while gold futures expiring in June fell 0.9% to $2,416.75 an ounce. Spot gold had hit a record high of nearly $2,450 on Monday.
Gold stalls as safe haven demand ebbs, rate fears persist
The absence of major instability in the Middle East weakened safe haven demand for gold, leaving it more vulnerable to concerns over U.S. interest rates.
Several Federal Reserve officials warned on Monday that the central bank needed more evidence of easing inflation before considering trimming interest rates. The central bank is likely to keep rates high for longer.
The dollar firmed as markets awaited the minutes of the Fed’s late-April meeting, due Wednesday, which pressured broader metal prices and cut short a rally.
High-for-long interest rates diminish the appeal of non-yielding assets like gold by increasing the opportunity cost of investing in them.
Other precious metals also sank on Tuesday. Platinum futures fell 1.6% to $1,042.60 an ounce, while silver futures fell 2.5% to $31.628 an ounce. Despite the drop, both metals retained a bulk of their gains from recent sessions.
Copper prices retreated sharply from record highs reached on Monday, as investors stepped back to evaluate the red metal’s potential for the year.
Copper’s recent rally was driven mainly by speculation over a potential supply deficit, leading to a short squeeze on the Comex exchange and further gains.
These gains cooled on Tuesday, with a focus on whether copper shipments could meet immediate demand.
Three-month benchmark copper futures on the London Metal Exchange fell 1.3% to $10,825.0 a ton, after hitting a record high above $11,100 on Monday.
One-month U.S. copper futures fell 1.1% to $5.0510 a pound, also retreating from record highs.
