Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Gold pinned near 3-month high, copper slumps on China COVID woes

Published 15/11/2022, 02:20
Updated 15/11/2022, 02:20
© Reuters.

By Ambar Warrick

Investing.com-- Gold prices hovered near three-month highs on Tuesday as mixed signals from Federal Reserve officials on the path of U.S. interest rates kept the dollar pinned to recent lows, while copper prices sank as rising COVID-19 cases in major importer China pointed to more potential demand disruption.

Fed officials Lael Brainard and Christopher Waller said this week that the U.S. central bank is likely to hike rates at a slower pace in the coming months. But they also suggested that the bank’s hiking cycle was far from over, and that stubbornly high inflation warranted much more tightening.

While slower raises in interest rates will likely provide some near-term relief to gold and other metal prices, a steady rise in U.S. rates is likely to dent appeal for the yellow metal in the long run.

Spot gold fell 0.1% to $1,768.72 an ounce, while gold futures fell 0.3% to $1,771.90 an ounce by 19:26 ET (00:26 GMT). But bullion prices rallied over 5% last week, while the dollar retreated after U.S. inflation read lower than expected for October.

Markets are now pricing in an over 80% chance that the Fed will hike rates by a relatively smaller 50 basis points in December. But the hike will still put interest rates at their highest since the 2008 financial crisis.

Rising U.S. interest rates weighed heavily on metal markets this year, as higher yields on Treasuries ramped up the opportunity cost of holding non-yielding assets.

But while gold is still off substantially from its annual highs, the metal is now close to breaking even for the year. Recent gains saw the yellow metal sharply pare its year-to-date losses to about 3%.

Among industrial metals, copper prices took little support from a weaker dollar, trading lower after tumbling nearly 3% on Monday.

Copper futures fell 0.3% to $3.8290 a pound. Rising COVID-19 cases in China dashed hopes for a further easing in the country’s zero-COVID policy.

While the world’s largest copper importer had last week loosened some movement and quarantine restrictions under its strict zero-COVID policy, a spike in local infections likely means that officials will be reluctant toward completely easing restrictions.

This is expected to weigh on commodity demand in the country, given that several industrial hubs - including Shanghai and Wuhan - are now facing renewed lockdown measures.

A series of COVID lockdowns in China ground economic activity to a halt this year, severely crimping the country’s appetite for commodity imports.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.