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Gold prices fall, copper hits three-month high thanks to Chinese stimulus

01.08.2023 12:15  Autor: InvestCentrum  Sekce: Burzovní zpravodajství  Tisk

Gold prices slightly declined on Tuesday, with futures remaining slightly higher than spot rates, while copper prices were supported by increasing expectations of additional stimulus measures in China.

On Monday, December futures for gold surpassed the significant level of $2,000 per ounce, as more investors placed bets on the Federal Reserve shifting away from its hawkish stance by the end of the year.

Despite the rally in December gold futures above $2,000 per ounce, spot gold prices remained cautious and lagged behind futures due to uncertainty surrounding the near-term outlook for the central bank, especially in anticipation of key U.S. payrolls data to be released this week.

Gold futures expiring in December declined by 0.4% to reach $2,002.25 per ounce, while spot gold fell by 0.1% to $1,964.14 per ounce as of 20:21 ET (00:21 GMT). Both gold instruments recorded substantial gains in July, benefiting from a significant retreat in the dollar due to expectations of a less hawkish Federal Reserve.

Dollar recovery, payrolls anticipation weigh on gold

Gold prices experienced some losses on Tuesday, driven by a recovery in the dollar, with data indicating that U.S. credit conditions were tightening due to high interest rates.

Investors are closely watching the key nonfarm payrolls data for July, scheduled to be released this Friday. If the jobs market shows continued strength, it could put pressure on gold as it gives the Federal Reserve more reason to continue raising interest rates.

During 2022, rising interest rates negatively impacted gold prices, and this year, they have also limited gains in the yellow metal. The increase in interest rates has raised the opportunity cost of holding gold, which does not provide any yield.

A growing disparity between gold futures and the spot price suggests that traders widely anticipate the Federal Reserve concluding its rate hike cycle by the end of the year. This expectation is likely to lead to significant inflows into the yellow metal.

Although U.S. economic conditions have shown resilience amid rising interest rates, growth is projected to decelerate in the second half of the year. This is expected to increase the safe-haven demand for gold.

Copper surpasses $4 mark due to talks of China implementing stimulus measures

Copper futures climbed above $4 per pound, reaching a level not seen in over three months. The optimism surrounding additional stimulus measures in China outweighed the impact of weak economic indicators from the country.

In early trade on Tuesday, copper futures experienced a slight pause, declining by 0.1% to $4.0113 per pound.

Chinese officials hinted at the possibility of implementing more stimulus measures in the coming months, which allowed the markets to overlook the data indicating a significant slowdown in business activity in the world’s largest copper importer during July.

Despite repeated assurances by top officials, Beijing has not yet unveiled any specific policies to boost local consumption and demand, leaving the market uncertain about the concrete measures that might be implemented.

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