Gold Set for Fifth Month of Losses as Fed Rate Risks Grow

By Ambar Warrick 

Investing.com-- Gold prices fell on Wednesday and were set for a fifth straight month of losses amid fears of aggressive policy tightening by the Federal Reserve, while copper rose as Chinese manufacturing activity improved slightly in August. 

Spot gold fell 0.2% to $1,721.67 an ounce by 21:56 ET (01:56 GMT), while gold futures dropped 0.2% to $1,732.85 an ounce. Both indicators were set to lose about 2.4% in August, their fifth straight month of declines after the Fed began hiking interest rates this year. 

Bullion prices tumbled on Tuesday after data showed a bigger-than-expected rise in U.S. job openings. The dollar index surged after the reading, given that strength in the labor market gives the Fed more space to raise rates aggressively.

The data also comes ahead of U.S. nonfarm payrolls, due on Friday. A strong reading is likely to sway the Fed towards more aggressive policy tightening. 

Traders are now penciling in a nearly 70% chance that the Fed will hike rates by 75 basis points in September. 

Gold has been on an extended downturn this year as a series of sharp interest rate hikes by the Fed drove up the dollar and U.S. Treasury yields. The yellow metal was hit especially hard last week after Fed Chair Jerome Powell warned that the central bank has no intention of slowing its tightening cycle. 

Among industrial metals, copper prices recovered slightly on Wednesday after data showed Chinese manufacturing activity shrank at a slightly lesser-than-expected pace in August.  

Copper futures rose 0.3% to $3.5685 a pound. The red metal was also set to gain 4% this month, snapping four straight months of declines as traders bet China will ramp up stimulus efforts this year.

China is the world’s largest importer of copper. Government data showed on Wednesday that the country’s manufacturing PMI read 49.4 in August, compared to expectations for a reading of 49.2. 

A reading below 50 indicates contraction. While overall business activity in China expanded in August, it did so at a slower pace than July.