Gold Pinned Below $1,650, Copper Awaits Major Production Reports

By Ambar Warrick

Investing.com-- Gold prices inched higher on Monday but were pinned below key support levels as markets feared more interest rate hikes by the Federal Reserve, while copper markets awaited quarterly production figures from some of the biggest miners in the world, due later this week.

Bullion prices marked their worst week in two months as data showed U.S. inflation will likely take much longer to cool than initially expected. The reading drove up expectations of more inflation-busting rate hikes when the Fed meets in November.

Markets are pricing in a nearly 100% chance that the Fed will hike rates by 75 basis points for a third consecutive month in November. The hike will put U.S. interest rates at around 4%, their highest level since late 2007.

Spot gold rose 0.1% to $1,646.02 an ounce, while gold futures rose 0.2% to $1,651.35 an ounce by 19:25 ET (23:25 GMT). Both instruments fell more than 3% in the prior week.

The yellow metal remained pressured by a strong dollar, which stayed within sight of a 20-year peak hit last month. U.S. Treasury yields also traded at their highest levels since the 2008 financial crisis.

Rising interest rates have battered gold prices this year while benefiting the dollar, as the opportunity cost of holding gold grew alongside lending rates. The trend has also largely sapped the yellow metal of its safe haven appeal, despite a steadily worsening global economic outlook.

Among industrial metals, copper prices rose on Monday, but remained pinned near two-year lows amid slowing economic activity across the globe.

Copper futures rose 0.5% to $3.4220 a pound. Prices of the red metal had risen 1% last week, benefiting from some weakness in the dollar and signs of tightening supply due to sanctions against Russia.

But the metal and most of its industrial peers could face fresh headwinds in the coming months. China, the world’s largest metal importer, has no plans of scaling back its economically damaging zero-COVID policy, President Xi Jinping signaled during the 20th National Congress of the Chinese Communist Party on Sunday.

The policy ground economic activity in the world’s second-largest economy to a halt this year, severely denting its appetite for commodity imports.

Focus this week is on third-quarter production reports from major miners BHP Group (NYSE:BHP) and Rio Tinto (NYSE:RIO) for more cues on the supply side of copper. Prices could benefit from a potential supply shortfall, given that exports by several Russian producers have been blocked by U.S. sanctions.

Rio Tinto will report production on Tuesday, while BHP's figures are due on Wednesday.