Gold steadies above $2,000 after volatile record highs

Gold prices inched up in Asian trade on Tuesday, stabilizing after reaching record highs earlier in the week. Persistent expectations of a less dovish Federal Reserve and increased safe-haven demand contributed to the support for the yellow metal.

Gold experienced an unusually large surge in early trade on Monday, reaching a lifetime high of $2,148.78 per ounce before sharply retreating from the peak.

The surge in gold prices was influenced by a mix of factors, with a significant contributor being somewhat less hawkish signals from the Federal Reserve. This increased expectations for early interest rate cuts by the central bank.

Safe-haven demand for gold increased following an attack on U.S. vessels in the Red Sea, raising concerns about a broader conflict in the Middle East. Additionally, a separate, unrelated attack on a prominent gold mine in Peru heightened fears of potential supply disruptions in gold markets.

Although gold retraced significantly from its record highs, it still settled comfortably above the coveted $2,000 an ounce level, suggesting the potential for further gains. Spot gold increased by 0.2% to $2,032.60 per ounce, while gold futures expiring in February rose by 0.4% to $2,050.35 per ounce by 00:19 ET (05:19 GMT).

Markets reevaluate rate cut expectations ahead of nonfarm payrolls data

Anticipation of crucial U.S. nonfarm payrolls data this Friday led to a moderation of recent optimism regarding early interest rate cuts by the Federal Reserve.

Fed Fund futures prices indicate that traders are now pricing in a 49% chance that the central bank will reduce rates as early as March 2024. This is a significant decrease from the 60% chance observed at the beginning of the week.

The dollar’s rebound from recent lows, fueled by uncertainty, has contributed to diminishing the recent gains in gold.

Despite the rebound in the dollar, the yellow metal is expected to maintain strong demand, as markets are convinced that the Fed has concluded its cycle of interest rate hikes. Rising interest rates typically increase the opportunity cost of investing in bullion, a factor that had adversely affected the yellow metal earlier this year.

Gold has also secured significant gains throughout November.

Copper prices remain steady amid mixed signals from China

Copper prices experienced a slight rise on Tuesday, with traders of the red metal receiving mixed cues from major copper importer China.

Copper futures expiring in March increased by 0.1% to reach $3.8303 per pound.

A private survey revealed that China’s services sector activity exceeded expectations in November. This follows another private survey that indicated unexpected resilience in the manufacturing sector just a few days earlier.

Optimism over the positive economic readings in China was tempered by growing concerns about a new epidemic in the country, marked by a surge in respiratory illnesses across major Chinese cities. Local media reports suggested that the National Health Commission, which played a central role in implementing strict anti-COVID measures, was contemplating restrictions on social gatherings.

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