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In a significant market development, gold prices this week have dipped below the $2,000 mark as concerns over the Israel-Hamas conflict ease, and investors turn their attention to the Federal Reserve.
Israel-Hamas Tensions Wane, Safe Haven Demand Falls
Despite the ongoing Israel-Hamas war, there are signs that tensions may be de-escalating. The absence of involvement from other Arab powers has reduced the risk premium associated with the conflict, resulting in a decrease in safe haven demand for gold. This trend marks a reversal of the gains made earlier in October during the war’s onset.
Federal Reserve Meeting Fuels Dollar Dominance
The strength of the US dollar has also impacted gold prices this week, with investors shifting their focus towards the greenback in anticipation of the Federal Reserve meeting. This move comes as they prepare for any hawkish surprises from the central bank.
Spot gold saw a 0.2% decline, settling at $1,992.88 per ounce, while gold futures for December contracted by 0.2% to $2,002 per ounce at 01:00 ET (05:00 GMT).
All Eyes on the Federal Reserve Meeting
With the Federal Reserve set to make a crucial decision on interest rates, the gold market’s attention is firmly fixed on the central bank. While it’s expected that the benchmark rate will remain unchanged, the Fed is likely to reiterate its commitment to higher rates due to persistent US inflation and economic resilience.
Impact on Gold Prices This Week
Higher rates pose a challenge for gold as they increase the opportunity cost of holding the precious metal. This has constrained gold’s ascent beyond the $2,000 per ounce level over the past year.
Mixed Fortunes for Gold
Despite these challenges, the ongoing Israel-Hamas conflict has provided some support for gold, resulting in a 6% to 8% increase in October. This marks the best monthly gain since March, and the yellow metal has also seen a nearly 10% increase in value throughout 2023.
Read More: German Inflation Drops to Lowest Since 2021 Amid Economic Struggles
Copper Prices Decline Due to Chinese Data
Turning to industrial metals, copper prices experienced a 0.5% drop on Tuesday following disappointing economic data from China, a major importer of copper.
The Purchasing Managers Index (PMI) data revealed an unexpected contraction in Chinese manufacturing activity for October, while the non-manufacturing sector’s growth was slower than anticipated.
This data emphasizes that Beijing’s stimulus efforts have provided only limited support to the Chinese economy. Other factors, including a real estate crisis and weak trade, are also hindering growth.
Uncertain Future for Copper Demand
The decline in Chinese economic indicators raises questions about the strength of future demand for copper in the coming months.
In summary, gold prices this week have dipped below the $2,000 mark due to easing tensions in the Middle East and focus on the Federal Reserve meeting. Additionally, copper prices have declined following disappointing Chinese economic data, raising concerns about future copper demand.
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Disclaimer:
Please note that this article serves solely for informational purposes. As such, Gold Futures it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
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