Gold prices dip as risk appetite ramps up on Fed pause bets

Investing.com-- Gold prices fell in Asian trade on Monday, as any relief over a potential pause in the Federal Reserve’s rate hikes was largely offset by traders selling the yellow metal in favor of more risk-driven assets. 

Gold saw some strength last week as weaker-than-expected U.S. nonfarm payrolls data, coupled with less hawkish signals from the Fed spurred deep declines in the dollar and Treasury yields.

But any major upside in the yellow metal was limited, as traders pivoted largely into risk-driven assets such as stocks and currencies. Safe haven demand for the yellow metal was further dented by a declining risk premium on the Israel-Hamas war, even as the conflict showed little signs of de escalating. 

Israel rejected calls for a ceasefire, while media reports suggested that Russian mercenary group Wagner was planning to supply air defense systems to Hezbollah. 

Concerns over the conflict had driven large gains in gold through October. But with the conflict now appearing unlikely to spill over into the broader Middle East region, traders locked in their profits on the yellow metal.

Spot gold fell 0.5% to $1,984.24 an ounce, while gold futures expiring in December fell 0.4% to $1,991.15 an ounce by 23:11 ET (03:11 GMT).

Gold sees little relief from easing Fed fears 

Traders are now pricing in a 95.2% chance that the Fed will not hike rates any further. The central bank is also expected to begin trimming rates by as soon as June 2024. 

But even with any rate cuts, the Fed has signaled that it will keep its benchmark rate above 5% until at least end-2024. 

U.S. rates are likely to stay higher for longer, pressuring non-yielding assets such as gold. This trade had pressured the yellow metal over the past year. 

Copper prices surge, China data awaited 

Among industrial metals, copper prices saw strong gains on Monday as risk appetite improved. 

Copper futures expiring in December jumped 0.7% to $3.6987 a pound, amid some hopes that an end to the Fed’s hiking cycle will help ease pressure on global industrial activity.

Focus was also squarely on key trade and inflation data from China, the world’s largest copper importer.

Trade data, which is due on Tuesday, is expected to offer more cues on copper imports in the country, which have stagnated over the past year amid slowing economic growth.