Gold prices rise as rate hike fears ease, China optimism boosts copper

Investing.com-- Gold prices rose slightly on Monday, extending gains from the prior session as mixed U.S. labor data cemented expectations that the Federal Reserve will keep interest rates on hold.

This notion weighed on the dollar and Treasury yields, allowing the yellow metal to appreciate on the prospect of fewer increases in its opportunity cost.

A softer dollar also helped spur gains in copper, with the red metal benefiting from increased optimism over more stimulus measures in major importer China, as well as signs of some recovery in Chinese business activity.

Focus is now on more economic indicators from China this week, as well as any more cues on the U.S. economy and future rate hikes. But trading in metal markets is expected to remain somewhat limited on Monday, on account of a U.S. market holiday.

Spot gold rose 0.2% to $1,944.80 an ounce, while gold futures expiring in December rose 0.2% to $1,970.95 an ounce by 00:23 ET (04:23 GMT).

Gold buoyed by Fed rate pause bets 

The yellow metal saw a strong recovery over the past week as a slew of middling U.S. economic readings showed that the Fed likely has limited headroom to keep raising interest rates. While nonfarm payrolls rose in August, the unemployment rate also rose.

The central bank is now almost unanimously expected to keep rates steady in September, and may also announce an end to its current rate hike cycle. 

But while U.S. interest rates are unlikely to rise further, they are also expected to remain at over 20-year highs for longer, given that U.S. inflation still remains sticky. 

Such a scenario still presents limited upside for gold, given that high interest rates push up the opportunity cost of holding bullion. 

Markets are now awaiting a string of Fed speakers this week for more cues on monetary policy, as well as some more indicators on the world’s largest economy. 

Copper near one-month high on China stimulus hopes 

Among industrial metals, copper prices rose on Monday, nearing a one-month high amid growing optimism over an economic recovery in major importer China.

Copper futures rose 0.3% to $3.8628 a pound.

Markets are awaiting more stimulus measures from Beijing, particularly measures aimed at China’s property market, as the government moves to shore up a slowing economic recovery. Chinese banks were seen cutting yuan deposit rates, while the People’s Bank also loosened some mortgage requirements. 

Sentiment towards the property market was also aided by beleaguered developer Country Garden Holdings (HK:2007) reaching a deal with debtholders to postpone some payments.

Focus this week is also on Chinese trade and inflation data, which is set to offer more cues on the world’s largest copper importer.