Gold Prices Rise Amid Economic Uncertainty; Copper Surges on China Optimism

Gold prices advanced, following mild dollar weakness, ahead of key U.S. economic data, but gains were tempered by expectations of higher-for-longer interest rates.

Copper prices surged 1% on reports of additional measures by the Chinese government to support local markets, alleviating concerns in the world’s largest copper importer.

Traders await further cues on the U.S. economy as bets on an early Federal Reserve rate cut diminish, which had previously impacted gold prices, causing them to drop to $2,000 an ounce in January.

Gold rebounded from its 2024 lows due to worsening geopolitical conditions in the Middle East, driving safe-haven buying. Bullion prices were further supported by expectations of eventual monetary policy easing by the Fed this year.

Spot gold rose 0.4% to $2,029.53 an ounce, while gold futures expiring in February increased 0.4% to $2,030.70 an ounce by 00:34 ET (05:34 GMT).

Awaiting U.S. GDP and inflation cues as March rate-cut expectations decline

Focus now turns to fourth-quarter U.S. gross domestic product data, expected this Thursday, which is anticipated to show a slowdown in overall growth.

Resilience in the U.S. economy could provide the Federal Reserve with more room to maintain higher interest rates for an extended period. The central bank is anticipated to keep rates steady at its upcoming meeting.

Ahead of the upcoming Federal Reserve meeting, focus shifts to the Personal Consumption Expenditures (PCE) price index data, expected to confirm persistent inflation in December.

U.S. inflation and strong labor market indicators, alongside cautionary remarks from Fed officials, led to a shift in market expectations, causing a retreat from bets on a March rate cut and impacting gold prices negatively earlier in January.

Elevated interest rates negatively impact gold as they increase the opportunity cost of holding the precious metal. This dynamic has constrained significant upward movement in gold prices over the last two years.

Copper surges 1% on optimistic China outlook

Copper futures for March rebounded nearly 1%, reclaiming a substantial portion of their losses for the year.

Copper prices rose in line with a broader upturn in Chinese financial markets, buoyed by reports of a potential 2 trillion yuan ($278 billion) support package for mainland stocks.

Reports of a potential 2 trillion yuan ($278 billion) support package for mainland stocks fueled optimism for increased support to the Chinese economy, boosting expectations for robust copper demand in the coming months.

Concerns about an economic slowdown in China have weighed heavily on copper prices in recent years, with market caution over potential weakness in the country’s demand for the red metal.

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