Gold prices steady as Fed fears ease, copper rises on China stimulus

Investing.com-- Gold prices were muted on Monday, but retained a bulk of last week’s gains as easing concerns over rising U.S. interest rates pulled down the dollar.

Industrial metals saw strong gains, with copper prices rising 0.6% to a 1-½ month high on the prospect of more stimulus measures in major importer China. 

A weaker dollar helped commodity prices across the board, as a string of weak labor and inflation readings over the past week saw traders betting that the Federal Reserve was done raising interest rates.

This notion pushed the dollar to an over two-month low, and also brought down Treasury yields.

Gold was a major beneficiary of this trade, with the yellow metal now once again coming within sight of the coveted $2,000 an ounce level. Gold prices rallied over 2% in the past week. 

Spot gold was flat at $1,982.49 an ounce, while gold futures expiring in December steadied at $1,984.85 an ounce by 00:17 ET (05:17 GMT). 

Fed rate cuts in focus, meeting minutes awaited 

Traders were now pricing in the possibility that the Fed could begin cutting interest rates by as soon as March 2024, although CME’s Fedwatch tool only showed a 30% chance of such a scenario.

Near-term, markets were focused squarely on the minutes of the Fed’s late-October meeting, where the bank kept rates steady and signaled that it will likely keep rates higher for longer. 

Still, the central bank is now almost unanimously expected to no longer raise interest rates, as weak inflation and labor data showed that the U.S. economy was cooling as expected.

But the prospect of rates remaining higher for longer bodes poorly for gold prices, given that high rates push up the opportunity cost of investing in bullion. This notion is expected to limit any major gains in gold over the coming months. 

Copper rallies on China stimulus hopes 

Copper prices rose to an over one-month high on Monday after Chinese officials vowed to roll out more policy support for the country’s beleaguered real estate sector, which is a key driver of copper demand.

Copper futures jumped 0.6% to $3.7557 a pound- their highest level since early-October. 

China’s central bank kept its benchmark loan prime rate at record lows, as it moved to foster a local economic recovery. The bank also injected about 80 billion yuan of liquidity into the economy, largely maintaining its pace of cash injections to support growth.

The move heralds some improvement in copper demand, especially if economic growth in the world’s largest copper importer picks up.