Gold, Copper Rally Eases as Fed Downplays Pivot Hopes

By Ambar Warrick 

Investing.com-- Gold and copper prices were muted on Thursday, pausing a recent rally after hawkish comments from Federal Reserve officials and signs of strength in the U.S. economy dented expectations for a dovish pivot by the central bank.

Metal markets rallied strongly this week after weak manufacturing data in the United States drove up expectations that the Fed would ease its hawkish stance to prevent more economic disruption from rising interest rates.

But Fed officials reiterated the bank’s hawkish stance on Wednesday. Better-than-expected service sector data and signs of a robust labor market also showed that the underlying U.S. economy remained strong, giving the central bank enough space to keep raising rates at a fast pace. 

Spot gold rose 0.1% to $1,718.40 an ounce, while gold futures rose 0.4% to $1,726.70 an ounce by 19:31 ET (23:31 GMT). Both indicators fell slightly on Wednesday.

The dollar also resumed its upward trajectory, breaking a nearly six-day losing streak and rallying nearly 1% on Wednesday. Focus now turns to upcoming U.S. nonfarm payrolls data on Friday to gauge the strength of the jobs market. 

Still, gold retained most of its gains made this week, trading comfortably above the $1,700 level as pressure from a hawkish Fed somewhat eased. The yellow metal also benefited from a measure of safe haven buying in recent sessions as investors feared a deeper economic collapse, particularly in the UK and the Eurozone. 

Demand for physical gold is also expected to rise in October thanks to a festival in India, the second-largest gold importer in the world. 

But bullion prices are still trading well below annual highs, as rising interest rates across the globe greatly increased the opportunity cost of holding gold, which offers no yields.

Among industrial metals, copper futures rose 0.2% to $3.5495 a pound after rallying sharply from a two-month low this week. 

But the outlook for copper remains pressured by slowing economic activity across the globe, which has severely dented demand for the industrial metal. 

Recently, the chief executive of Chilean miner Antofagasta (LON:ANTO) Plc, Ivan Arriagada, warned that a further slowdown in economic growth is expected to weigh on copper prices.

His warning mirrors a recent statement from the world's no.2 miner Rio Tinto (ASX:RIO), and also came shortly after the Chilean government sharply cut its 2023 average price estimate for copper to $3.62 a pound from $3.92.

Chile is the world’s largest copper producer, and is facing economic pressure from weakening prices.