Gold prices remained steady on Monday, holding onto a significant portion of last week’s gains, driven by reduced concerns about increasing U.S. interest rates, which contributed to a decline in the dollar.

Industrial metals experienced robust increases, with copper prices climbing 0.6% to reach a 1-½ month high, driven by expectations of additional stimulus measures in China, a major importer.

The decline in the dollar supported commodity prices across various sectors, as a series of poor labor and inflation indicators in the past week led traders to speculate that the Federal Reserve would refrain from further interest rate hikes.

This sentiment led the dollar to its lowest point in over two months and contributed to a decrease in Treasury yields.

Gold significantly benefited from this trend, and the yellow metal is once again approaching the coveted $2,000 per ounce level. Gold prices surged over 2% in the past week.

Spot gold showed little change at $1,982.49 per ounce, while gold futures expiring in December stabilized at $1,984.85 per ounce as of 00:17 ET (05:17 GMT).

Market eyes potential Fed rate cuts; awaits meeting minutes

Traders are currently factoring in the possibility of the Federal Reserve initiating interest rate cuts as early as March 2024, despite CME’s Fedwatch tool indicating only a 30% chance of this scenario.

In the near term, markets are closely focused on the minutes of the Federal Reserve‚s late-October meeting, during which the bank maintained steady rates and indicated a likelihood of keeping rates higher for an extended period.

The central bank is now almost universally anticipated to refrain from further interest rate hikes, given the indications of a cooling U.S. economy evident in weak inflation and labor data.

The expectation of rates staying elevated for an extended period is unfavorable for gold prices, as higher rates increase the opportunity cost of investing in bullion. This expectation is likely to constrain significant gains in gold over the upcoming months.

Copper rallies on China stimulus prospects

Copper prices rose to an over one-month high on Monday after Chinese officials vowed to roll out more policy support for the country’s beleaguered real estate sector, which is a key driver of copper demand.

Copper futures rose by 0.6% to $3.7557 per pound, marking their highest level since early October.

China’s central bank maintained its benchmark loan prime rate at record lows, aiming to stimulate a local economic recovery. Additionally, the bank injected approximately 80 billion yuan into the economy, largely sustaining its pace of cash injections to bolster growth.

This move suggests a potential improvement in copper demand, particularly if there is an acceleration in economic growth in the world’s largest copper importer.

 

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