Gold prices dipped slightly in Asian trading on Tuesday, though they retained some gains from the previous session as signs of a cooling U.S. economy increased expectations for interest rate cuts, driving the dollar to two-month lows.

Despite the recent gains, gold remained well below the record highs achieved in May. Upcoming labor market data, due later this week, is expected to provide further insight into the trajectory of U.S. interest rates.

Spot gold edged down 0.1% to $2,347.66 an ounce, while gold futures for August delivery also slipped 0.1% to $2,368.50 an ounce by 00:36 ET (04:36 GMT).

Rate Cut Expectations Rise on Weak U.S. Data, Dollar Falls

Traders have increased the likelihood of a 25 basis point rate cut in September to 52.1%, up from a 47% chance the previous day, according to the CME Fedwatch tool. This shift followed Monday’s purchasing managers index (PMI) data, which indicated that U.S. manufacturing activity contracted for the second consecutive month in May.

The weak PMI data, coming on the heels of a soft gross domestic product (GDP) report, fueled bets that the U.S. economy is slowing down. This potential cooling could lead to lower inflation, providing the Federal Reserve with more confidence to begin cutting interest rates. Consequently, the dollar dropped to two-month lows on Monday.

The Federal Reserve is scheduled to meet next week and is expected to maintain current interest rates. However, key labor market data due this week will likely influence the central bank’s future rate decisions.

The European Central Bank and the Bank of Canada are also expected to announce interest rate cuts this week. Lower rates typically benefit gold and other precious metals, as the opportunity cost of holding these non-yielding assets decreases in a lower-rate environment.

Other precious metals stabilized on Tuesday after gains on Monday. Platinum futures fell 0.1% to $1,023.50 an ounce, while silver futures held steady at $30.785 an ounce.

Copper Prices Mixed Amid Weak PMI Data

In the industrial metals sector, copper prices showed mixed performance on Tuesday, stabilizing after a decline from record highs over the past week. Benchmark copper futures on the London Metal Exchange rose 0.5% to $10,197.50 a tonne, while one-month copper futures fell 0.4% to $4.6645 a pound.

Weak PMI data from both the U.S. and China has heightened concerns about slowing manufacturing activity worldwide, potentially leading to reduced demand for copper.

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