Investing.com — Gold prices rose in Asian markets on Friday as the dollar weakened following a big interest rate cut by the Federal Reserve and markets welcomed the prospect of further rate cuts.
Among industrial metals, copper prices rose on reports that China, the largest importer, is considering further support for its property market after the People's Bank of China kept its benchmark lending rate unchanged.
Gold initially reacted negatively to Wednesday's rate cut after Fed Chairman Jerome Powell also offered a less dovish outlook for longer-term interest rates.
But markets welcomed the prospect of lower interest rates in the near term, which weakened the dollar and encouraged inflows into risky assets.
As of 00:43 ET (04:43 GMT), it was up 0.3% to $2,593.31 an ounce, while December maturities were up 0.2% to $2,618.40 an ounce.
Worsening tensions in the Middle East after Israel allegedly detonated electronic equipment used by Hezbollah, triggering vows of retaliation, also boosted demand for gold as a safe-haven asset.
Gold Set for Weekly Gain as Fed Begins Easing Cycle
Spot prices are expected to rise by about 0.6% this week as the Fed begins an easing cycle that could see interest rates fall by as much as 125 basis points this year, with the Fed delivering 50 basis points of rate cuts, at the high end of market expectations.
Traders welcomed the prospect of rates falling sharply in the near term, even as Fed Chairman Jerome Powell suggested the neutral rate would be higher than in the past.
Citi analysts said the Fed could cut rates again by 50 basis points in November.
The Fed's sharp interest rate cuts have also raised concerns about slowing U.S. economic growth, keeping gold in demand as a safe-haven asset.
Falling interest rates bode well for gold as they reduce the opportunity cost of investing in it.
Other precious metals were flat, mainly lagging gold this week, which was steady at $989.55 per ounce while rupees fell 0.3% to $31.340 per ounce.
Copper rises on hopes of China property stimulus
The London Metal Exchange benchmark rose 0.5% to $9,582.50 a tonne, while one-month contracts rose 0.7% to $4.3788 a pound.
Copper prices rose after a Bloomberg report said China, the biggest importer of copper, was considering lifting a key restriction on home buying in an effort to jump-start its housing market, a move that could give a boost to the struggling real estate sector.
But the People's Bank of China kept its policy rate unchanged on Friday, disappointing some traders who had expected further rate cuts to boost sluggish domestic economic growth.
Calls for Beijing to provide further stimulus have grown in recent weeks, particularly following a series of weak economic data in August.
