Gold weakens, but rate cut bets, safe haven demand keep prices above $2,500

Investing.com-- Gold prices fell in Asian trade on Tuesday amid some pressure from a rebound in the dollar, although the prospect of lower interest rates and increased safe haven demand kept the yellow metal in sight of recent peaks.

Among industrial metals, copper prices saw an extended rebound amid bets that lower interest rates will help spur a demand recovery in the coming months and offset weakening demand in top importer China.

Spot gold fell 0.4% to $2,507.15 an ounce, while gold futures expiring in December fell 0.5% to $2,542.05 an ounce by 00:54 ET (04:54 GMT). 

Gold keeps record highs in sight amid rate cut bets, safe haven demand 

Spot prices remained in sight of a record high of around $2,532 an ounce hit earlier in August.

Demand for gold came amid increasing confidence that the Federal Reserve will begin cutting interest rates in September, following a slew of dovish signals from the central bank.

But traders were split over a 25 or 50 basis point reduction, CME Fedwatch showed. PCE price index data- the Fed’s preferred inflation gauge- is due on Friday and is expected to shed more light on this notion.

Lower rates bode well for gold, given that they reduce the opportunity cost of investing in non-yielding assets. 

Increased geopolitical risks also fueled safe haven demand for gold, as ceasefire talks between Israel and Hamas yielded little progress. Clashes between Ukraine and Russia continued, while a brewing conflict between eastern and western forces in Libya caused a spike in oil prices, further spooking markets. 

Other precious metals fell on Tuesday, as a rebound in the dollar, from 13-month lows, also pressured markets.

Platinum futures fell 0.7% to $961.15 an ounce, while silver futures fell 0.5% to $30.30 an ounce.

Copper extends recovery on rate cut, China hopes 

Benchmark copper futures on the London Metal Exchange rose 0.6% to $9,361.50 an ounce after a holiday on Monday, while one-month copper futures rose 0.3% to $4.2780 an ounce. 

The red metal saw an extended recovery in recent sessions on bets that worsening economic conditions in top importer China will invite more stimulus measures from Beijing. 

The prospect of interest rate cuts in the U.S. also diminished concerns over a U.S. recession, and spurred bets that a soft landing for the U.S. economy will help buoy copper demand.