Gold prices surge to 7-month high on dovish Fed

Gold prices in Asian trade rose on Wednesday, reaching a nearly seven-month high due to dovish signals from Federal Reserve officials, increasing expectations of an early policy pivot by the central bank.

A decline in the dollar to nearly four-month lows, along with lower U.S. Treasury yields, benefited gold. The 10-year rate reached a two-month low in Asian trade.

Caution ahead of crucial economic readings from the U.S. and China, coupled with weak data from Japan and the euro zone, boosts safe-haven demand for gold.

Spot gold increased by 0.1% to $2,044.08 per ounce, while gold futures expiring in December rose by 0.2% to $2,044.20 per ounce by 23:27 ET (04:37 GMT). Spot prices were now approximately $30 away from the record high reached earlier this year.

Gold supported by Fed pivot bets, set for strong November

Fed officials, in separate comments, indicated the need for caution in maintaining higher rates for an extended period. They suggested that easing inflation might prompt the bank to loosen policy earlier than anticipated.

Fed Governor Christopher Waller, known for his hawkish stance, mentioned that high rates have sufficiently subdued inflation this year. He suggested that a further decline in price pressures would likely lead the bank to start cutting interest rates.

Fed Governor Waller’s comments prompt a 40% chance of rate cuts by March 2024. Traders expect the Fed to hold rates in December. More insights anticipated this week before the blackout period. Chairman Powell to speak soon.

The possibility of a shift in the Fed’s hawkish stance drove significant gains in gold during November, poised to add over 3% for the month. Potential rate cuts by the Fed are expected to favor gold markets, as higher rates increase the opportunity cost of investing in the yellow metal.

Tony Sycamore, analyst at IG Markets called the trend a perfect environment for gold in an interview with Ausbiz.

Copper optimistic with eased China concerns due to supply disruptions

Copper prices remained stable on Wednesday amid supply disruptions in Peru and Panama, contributing to a reduction in uncertainty ahead of crucial Chinese economic data later in the week.

Copper futures expiring in March held steady at $3.8460 per pound after a 1.5% rally earlier in the week. The weakness in the dollar also supported copper prices.

The Panama government ordered the shutdown of a copper mine operated by Canadian miner First Quantum (NASDAQ: QMCO), citing an unconstitutional contract. This development coincided with a planned strike at MMG Ltd’s Las Bambas copper mine in Peru.

The output disruptions indicate potential tightening in copper markets in the coming months, a trend that could bolster prices for the red metal.

 

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