Gold treads water, copper prices flat ahead of China PMIs

Investing.com -- Gold prices kept to a tight range on Monday as investors awaited more major cues on the U.S. economy this week, while copper prices were muted ahead of key economic data from major importer China. 

The yellow metal had closed flat for the prior week after Federal Reserve hiked interest rates as expected, and said that it will stick to plans for at least one more hike this year.

But data on Friday showed that inflation - particularly the Fed’s preferred gauge - eased further in June, which could necessitate a less hawkish stance from the central bank.

Markets are banking on an eventual pause in the Fed’s rate hike cycle this year, which is expected to benefit gold. This was also shown by a wide divergence between gold futures and the spot price.

Gold futures expiring in December fell 0.2% on Monday to $1,996.55 an ounce, while spot gold fell slightly to $1,958.41 an ounce by 20:26 ET (00:26 GMT). 

U.S. nonfarm payrolls in focus this week 

Focus this week is largely on key U.S. nonfarm payrolls data due on Friday, which is expected to offer more insight into the robust labor market. 

While the Fed has targeted some cooling in the labor space with its interest rate hikes, U.S. employment has remained largely strong this year - a scenario that could elicit a hawkish stance from the central bank.

Minneapolis Fed President Neel Kashkari said on Sunday that future rate hikes will be largely data-dependent, and that the labor market was due for some cooling this year. He also said the outlook for inflation appeared positive.

Any potential pauses in the Fed’s rate hike cycle bode positively for gold, given that rising interest rates push up the opportunity cost of holding bullion. But strong U.S. economic readings last week had weighed on gold, amid concerns that strength in the U.S. economy gives the Fed enough headroom to keep hiking rates. 

Copper muted ahead of China PMIs 

Among industrial metals, copper prices moved little ahead of key business activity data from China.

Copper futures were flat at $3.9358 a pound. 

Focus was largely on Chinese purchasing managers index (PMI) data due later on Monday, for more cues on the world’s largest copper importer. The readings are expected to show that activity deteriorated further through July, amid a slowing economic rebound in the country.

But the Chinese government is expected to outline more stimulus measures on Monday - a scenario that could further boost copper prices after strong gains last week.