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Why Gold and Copper Prices Hold Steady Amid Rate Hike?

Why Gold and Copper Prices Hold Steady Amid Rate Hike

Gold prices and Copper prices in Asian trade showed minimal movement on Thursday, retaining a steady trading range witnessed over the past week. Market sentiment teetered on predictions regarding the Federal Reserve’s initiation of interest rate reductions in the approaching year.

Key Highlights:

  • Gold Prices Rangebound: Hovered between $2,000 and $2,050, reflecting market uncertainty over potential Fed rate cuts in 2024.
  • Fed Cautionary Stance: Fed officials cautioned against overly optimistic projections of an imminent rate cut, citing persistent inflation levels.
  • Market Speculations: Despite Fed warnings, markets priced in over a 70% chance of a 25 basis point rate cut in March 2024.
  • Economic Indicators Impact: Awaited economic readings including GDP, PCE price index, and jobless claims to gauge the U.S. economy’s strength.

Gold and Copper prices Market Range and Speculation

The yellow metal clung within the $2,000 to $2,050 an ounce spectrum throughout the preceding week. Despite initial breakthroughs beyond the $2,000 mark owing to dovish signals from the Fed, further progress encountered hindrances. Improved risk appetite and reevaluations of anticipated early rate cuts by traders contributed to this stagnation.

Contrary to market expectations, several Fed officials cautioned against excessively optimistic projections of an imminent rate cut. Their rationale circled around the persistence of inflation levels comfortably exceeding the Fed’s 2% annual target.

Impact on Gold and the Dollar

Such commentary prompted a rebound in the dollar from its near five-month low earlier this week, consequently capping substantial gold uptrends.

Spot gold registered a 0.3% increase, reaching $2,036.89 an ounce, while gold futures expiring in February remained unchanged at $2,048.65 an ounce by 00:34 ET (05:34 GMT).

Despite the Fed officials’ recent stance, Fed Fund futures reflected a 70%+ likelihood of a 25 basis point rate cut in March 2024.

Markets awaited various economic indicators this week, including a revised third-quarter GDP report and upcoming data on the PCE price index and weekly jobless claims. The robustness of the U.S. economy offers the Fed flexibility in maintaining higher rates for an extended period.

Also Read: Gold Surges Past $2,000 as Federal Reserve Signals Strong 2024 Rate Cuts

Potential Impact on Gold and Copper Prices

Any indications of economic deceleration are anticipated to weaken the dollar and correspondingly elevate gold prices. The precious metal tends to benefit from reduced interest rates, countering the increased opportunity cost associated with higher rates.

Copper Prices Near 4-Month High

In the realm of industrial metals, copper prices neared a four-month peak on Thursday. Factors including a weakened dollar and positive expectations around stimulus initiatives in China propelled notable gains for this essential metal.

March-expiring copper futures stabilized at $3.9078 per pound, maintaining proximity to levels observed in early August.

Also Read: Silver Prices Forecast: Unveiling the Big Impact of CPI and Federal Reserve Moves

Copper Prices Economic Measures

China’s sustained maintenance of record-low benchmark loan prime rates signals efforts to bolster economic growth. Despite economic challenges, the country’s demand for copper remains robust, expected to further improve with additional stimulus measures in the pipeline.

Anticipations revolve around an impending tightening in copper markets for 2024. Increasing demand coupled with major mine closures in Panama and Peru are foreseen to limit supply, possibly elevating copper prices further.


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