Gold prices rise on bets of no more Fed rate hikes, but gains limited

Investing.com-- Gold prices rose on Thursday, encouraged by a weaker dollar and Treasury yields after the Federal Reserve struck a less hawkish tone than expected, although gains in the yellow metal were limited by increased risk appetite. 

The central bank left interest rates on hold, as widely expected, on Wednesday. But comments from Fed Chair Jerome Powell saw markets pricing in a diminished chance of any more rate hikes, especially as the Fed chair acknowledged that financial conditions had tightened substantially in recent months. 

Fed fund futures showed that traders were pricing in an 80% chance of a rate pause in December, and that the Fed will begin trimming rates by mid-2024.

The dollar and Treasury yields sank on this notion, benefiting gold. But traders mostly pivoted into risk-driven assets like stocks, limiting any major gains in the yellow metal.

Spot gold rose 0.2% to $1,986.07 an ounce, while gold futures expiring in December rose 0.3% to $1,993.70 an ounce by 00:52 ET (04:52 GMT). 

Gold sees some rate relief, but nonfarm payrolls another test 

Focus was now squarely on upcoming U.S. nonfarm payrolls data, due on Friday. Any signs of strength in the jobs market gives the Fed more impetus to hike rates, with Powell also reiterating that notion on Wednesday. 

A private payrolls reading released on Wednesday showed some cooling in the jobs market, which could signal a softer nonfarm payrolls reading. 

While gold is expected to benefit from the prospect of no more rate hikes, any major upside in the yellow metal remains doubtful with U.S. interest rates likely to remain higher for longer. 

Powell had also acknowledged that the Fed still had a long way to go before reaching its 2% inflation target, and had previously signaled that the bank’s target rate will remain above 5% until at least end-2024. 

Higher rates bode poorly for gold, given that they increase the opportunity cost of holding the yellow metal. Still, the yellow metal was sitting on strong gains from October, as the outbreak of the Israel-Hamas war drove up safe haven demand.

Copper rises on softer dollar, but China fears limit gains 

Among industrial metals, copper prices rose slightly on Thursday, benefiting from a weaker dollar after the Fed meeting. 

Copper futures rose 0.3% to $3.6710 a pound.

But bigger gains in the red metal were held back by persistent concerns over China, following a string of weaker-than-expected readings on manufacturing activity this week. Markets were now awaiting a reading on the services sector, due this Friday.