Gold Hits 1-Month Low After Hawkish Powell, Copper Plummets

By Ambar Warrick

Investing.com-- Gold prices sank to a one-month low on Monday following hawkish signals from the U.S. Federal Reserve, while copper prices plummeted on weak industrial data from China.

Spot gold prices slumped 0.7% to $1,726.06 an ounce, while gold futures sank 0.7% to $1,727.50 an ounce by 22:20 ET (02:20 ET). Both instruments were trading around their weakest levels since late July.

Prices of the yellow metal plummeted last week after Fed Chair Jerome Powell dismissed any notion of a dovish tilt by the Fed, and warned that U.S. consumers and businesses would have to contend with higher interest rates as inflation rises. The Fed Chair also said that economic growth in the country would likely slow as a result.

Powell’s comments spurred a rally in the dollar, with the greenback trading around 20-year highs on Monday. Strength in the dollar, coupled with the prospect of rising interest rates severely dents gold’s outlook for the year.

Over 60% of traders now expect the Fed to hike rates by 75 basis points- the upper end of forecasts- in September. Comments from several Fed officials suggest that U.S. interest rates could end the year significantly above 3%, from the current rate of 2.25 to 2.5%.

Focus this week turns to U.S. payrolls data due Friday, which could give the Fed even more space to raise rates.

Rising interest rates have largely sapped gold’s gains this year, despite the yellow metal seeing some gains during the onset of the Russia-Ukraine conflict. Gold is trading down nearly 5% over the past 12 months, and has slumped nearly 20% from 2022 peaks.

Industrial metals also slipped as dollar strength weighed, while Powell’s economic warning sowed doubts over metal demand.

Copper futures plummeted 1.8% on Monday, with weak industrial data from China furthering the red metal’s losses. Industrial profits in the country continued their decline in July.

Focus is now on Chinese PMI data due later this week, which is likely to sway prices further.

Copper prices have fallen substantially this year on an economic slowdown in China, the biggest importer of the yellow metal.