Gold prices pull back from $2,000 as rate uncertainty persists

Investing.com-- Gold prices rose slightly in Asian trade on Thursday after pulling back from key levels in overnight trade as strong labor market data fueled uncertainty over the path of U.S. interest rates. 

The yellow metal saw a strong run-up this week amid growing optimism that the Federal Reserve was done raising interest rates in its current cycle. Gold prices briefly crossed the $2000 an ounce mark on Tuesday.

But signs of resilience in the U.S. labor market and hawkish signals from the minutes of the Fed’s recent meeting stalled gold’s rally. A rebound in the dollar- from near three-month lows- also weighed on bullion prices. 

Spot gold rose 0.2% to $1,994.43 an ounce, while gold futures expiring in December rose 0.1% to $1,995.20 an ounce by 00:11 ET (05:11 GMT). 

Gold trading volumes were also somewhat limited on account of market holidays in the U.S. and Japan this week. 

Gold rally stalls after strong jobless claims data

Data on Wednesday showed that U.S. jobless claims fell less than expected in the prior week, indicating that the labor market was not cooling as quickly as investors had previously expected.

A strong labor market could keep the Fed relatively hawkish in the near-term, although traders were convinced that the central bank will raise interest rates no more.

But the jobless claims data, along with the Fed minutes still brewed some uncertainty over when the Fed could begin trimming rates in 2024. CME Group’s Fedwatch tool showed that traders trimmed their expectations for a rate cut by as soon as March 2024.

Given that the Fed minutes still reiterated the bank’s outlook on higher for longer interest rates, gold prices are likely to see limited upside in the coming months, given that higher rates push up the opportunity cost of investing in bullion. 

Still, signs of deteriorating economic conditions across the globe could spur some safe haven demand for the yellow metal. 

Copper prices edge lower, more China stimulus awaited 

Among industrial metals, copper prices saw a degree of profit taking on Thursday after strong gains earlier in the week. 

Copper futures fell 0.1% to $3.7633 a pound, but were up 0.8% so far this week.

Focus was largely on more planned stimulus measures from China, as the government prepared a whitelist of property developers for access to more funding. The property sector is a key driver of Chinese copper demand.

On the supply front, focus remained on copper mine closures in Panama and Peru, which could potentially tighten supplies going into 2024. Such a scenario, coupled with increased demand for the red metal, presents a positive outlook for prices.