Gold Falls, Copper Eyes Third Week of Gains on Supply Fears

By Ambar Warrick 

Investing.com-- Gold prices fell slightly on Friday as the dollar recovered on stronger-than-expected third-quarter U.S. GDP data, while copper prices were set for a third straight week of gains on fears that supply will tighten in the coming months. 

Sentiment towards industrial metals improved as data on Thursday showed the U.S. economy was faring better under the rate hike regime than previously thought. But the outlook still remains uncertain.

Signs of resilience in the economy gives the Federal Reserve more headroom to keep raising interest rates at a sharp clip. This boosted the dollar and Treasury yields, which pressured metal prices. 

Thursday’s data also cooled expectations that the Fed will soften its pace of interest rate hikes in December, with traders raising their expectations for a 75 basis point (bps) hike. The trend may be bearish for gold prices, especially amid positioning for higher U.S. interest rates.

The central bank is widely expected to raise interest rates by 75 basis points next week- its fourth such raise this year. 

Bullion prices were dented by rising interest rates this year, as the opportunity cost of holding gold, which offers no yields, increased substantially.  

Spot gold fell 0.1% to $1,661.86 an ounce, while gold futures were unchanged at $1,665.80 an ounce by 19:59 ET (23:59 GMT). Both instruments were set to end the week slightly higher, helped by an easing dollar.

Copper prices fared far better this week, and were set for a third consecutive week of gains with a 1.5% rise. 

Prices of the red metal largely shrugged off concerns over sluggish demand in major importer China, with focus now turning to a potential supply crunch. Slowing production in Chile and U.S. sanctions against some Russian producers are widely expected to tighten copper supply in the coming months.

Demand for the red metal is also expected to increase amid a global drive for electrification, with several countries trying to move away from fossil fuels. Growing demand for electric vehicles is also expected to spur a rush into copper. 

Major commodities trader Trafigura recently warned that current copper supplies were insufficient to meet such a demand explosion. 

On Friday, copper futures fell 0.2% to $3.5215 a pound.