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Gold prices dip, copper hits 3-mth high on China stimulus bets

Published 01/08/2023, 01:50
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Investing.com -- Gold prices edged lower on Tuesday, although futures remained largely ahead of spot rates, while copper prices were underpinned by growing expectations of more stimulus measures in China.

December futures for the yellow metal cleared the closely-watched $2,000 an ounce level on Monday, amid increasing bets that the Federal Reserve will wind down its hawkish stance by the end of the year.

But uncertainty over the near-term outlook for the central bank - especially ahead of key U.S. payrolls data this week - kept spot gold prices trading well behind futures. 

Gold futures expiring in December fell 0.4% to $2,002.25 an ounce, while spot gold fell 0.1% to $1,964.14 an ounce by 20:21 ET (00:21 GMT). Both instruments logged strong gains in July, as the dollar retreated substantially on hopes of a less hawkish Fed.

Dollar recovery, payrolls anticipation weighs on gold 

A recovery in the dollar spurred some losses in gold on Tuesday, as data showed that U.S. credit conditions were tightening amid high interest rates.  

Markets are now squarely focused on key nonfarm payrolls data for July, due this Friday. Any signs of continued strength in the jobs market are likely to pressure gold, given that it offers the Fed more impetus to keep raising interest rates.

Rising interest rates had battered gold prices through 2022, and have limited gains in the yellow metal so far this year by pushing up the opportunity cost of holding the non-yielding asset.

But a growing divergence between gold futures and the spot price indicates that traders widely expect the Fed to conclude its rate hike cycle by the year-end, which is expected to drive large flows into the yellow metal.

While U.S. economic conditions have so far remained resilient despite rising rates, growth is also expected to slow in the second half of the year, pushing up safe haven demand for gold.

Copper crosses $4 as China talks stimulus 

Among industrial metals, copper futures crossed the $4 a pound level for the first time in over three months, as optimism over more stimulus measures in China largely offset weak economic indicators from the country.

The red metal paused in early trade on Tuesday, with futures falling 0.1% to $4.0113 a pound.

Chinese officials hinted that more stimulus measures were on tap in the coming months, helping markets look past data that showed business activity in the world’s largest copper importer slowed sharply through July.

But Beijing is yet to unveil any concrete policies to spur local consumption and demand, despite repeated assurances by top officials.

 
 

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