On Tuesday, gold prices fell slightly, while futures remained far ahead of market rates, Copper prices were supported by rising prospects of additional stimulus measures in China. On Monday, December futures for gold broke over the closely watched $2,000 per ounce threshold, amid growing expectations that the Fed may reduce its hawkish stance by the end …
On Tuesday, gold prices fell slightly, while futures remained far ahead of market rates, Copper prices were supported by rising prospects of additional stimulus measures in China.
On Monday, December futures for gold broke over the closely watched $2,000 per ounce threshold, amid growing expectations that the Fed may reduce its hawkish stance by the end of the year. However, uncertainty over the central bank’s near-term outlook, particularly ahead of critical US payrolls data this week, kept spot gold prices trailing futures.
December gold futures declined by 0.4% to $2,002.25 per ounce, while actual gold fell 0.1% to $1,964.14 per ounce by 00:21 GMT. Both instruments made significant gains in July, as the dollar fell sharply on expectations of a less aggressive Fed. The dollar’s resurgence prompted modest gold losses on Tuesday, as statistics revealed that credit conditions in the U.S. were tightening amid rising interest rates.
Markets are now focusing on critical non-farm payrolls data for July, which will be released this Friday. Any signals of ongoing employment growth are expected to put pressure on gold, since it gives the Fed more reason to keep hiking interest rates. Rising interest rates have hammered gold prices until 2022, limiting gains in the yellow metal so far this year by increasing the opportunity cost of owning the non-yielding commodity. However, a widening difference between gold futures and spot prices shows that traders commonly expect the Fed to complete its rate hike cycle by the end of the year, resulting in huge flows into the yellow metal. While the U.S. economy has remained resilient despite higher interest rates, growth is likely to decline in the second half of the year, increasing demand for gold as a safe haven.
As for the red metal, Copper futures surpassed $4 a pound for the first time in more than three months, as optimism over additional stimulus measures in China more than outweighed weak economic indicators from the country. Chinese officials hinted at additional stimulus measures in the coming months, helping markets ignore data showing that economic activity in the world’s largest copper importer fell substantially in July. Despite repeated assurances from top officials, Beijing has yet to disclose any specific initiatives to boost domestic consumption and demand.
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