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Gold Prices Decline Amid Diminished Safe Haven Demand

Gold prices fell in Asian trade on Thursday and approached breaking below key levels as diminishing safe haven demand and the prospect of higher U.S. interest rates for a prolonged period exerted pressure on the yellow metal.

Bullion prices have experienced a sharp drop from record highs over the past week, as the potential conflict between Iran and Israel failed to escalate as feared by the markets. This significantly reduced the safe haven appeal for gold.

The decline in safe haven demand made gold susceptible to headwinds from U.S. rates, as higher rates increase the opportunity cost of investing in bullion.

Spot gold decreased by 0.1% to $2,313.62 an ounce, while gold futures expiring in June dropped by 0.6% to $2,325.05 an ounce by 00:26 ET (04:26 GMT).

The strength of the dollar, which remained close to recent five-month peaks, also exerted downward pressure on metal prices.

Gold is approaching the $2,300 an ounce support level, and further declines for the yellow metal may follow.

Factors Influencing Gold’s Future Movement

However, gold’s future movement is expected to be largely influenced by upcoming cues regarding the U.S. economy and interest rates.

Analysts anticipate that later on Thursday, the first-quarter U.S. gross domestic product data will reveal whether the world’s largest economy maintained its resilience in early 2024

PCE price index data, the Federal Reserve’s preferred inflation gauge, is likely to have a significant impact on gold, as it directly relates to the central bank’s interest rate outlook.

Hotter-than-expected U.S. inflation readings and hawkish signals from the Fed have led traders to largely discount expectations for a June rate cut, adding near-term pressure on gold prices.

Other precious metals also retreated on Thursday after declining from recent peaks over the past week. Platinum futures fell by 0.3% to $910.30 an ounce, while silver futures dropped by 1% to $27.078 an ounce.

Copper prices continued to cool off from recent two-year highs as weak economic data and concerns about high interest rates somewhat offset optimism regarding tighter markets.

Three-month copper futures on the London Metal Exchange fell by 0.2% to $9,773.0 a ton, while one-month copper futures decreased by 0.1% to $4.4510 a pound. Both contracts were below the two-year highs reached earlier in April, following stricter western sanctions on Russian metal exports that indicated tighter markets.

However, the top copper producer, Chile, dampened this optimism by signaling that state-owned copper miner Coldeco would increase output in 2024.

Concerns about steady demand also weighed on copper prices after U.S. purchasing managers index data showed weaker-than-expected results for April, with the manufacturing sector returning to contraction territory.

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