Gold prices weaken amid hawkish Fed risks, but hold $1,900 level

Investing.com -- Gold prices fell slightly on Friday as traders largely favored the dollar ahead of more signals on U.S. monetary policy from the Jackson Hole Symposium, although signs of weakening growth still kept gold above key levels. 

Gold was also set for its first positive week in five, as it recovered from five-month lows hit earlier in August. Despite Friday’s losses, spot prices also retained the closely-watched $1,900 per ounce level.

Still, the outlook for the yellow metal remained muddled by the prospect of higher U.S. interest rates. The dollar stood at an over two-month high on Friday, while Treasury yields rose back towards multi-decade highs.

Two Federal Reserve officials also said they supported the recent spike in bond yields, stating that it helped further cool the U.S. economy and runaway inflation. 

Spot gold fell 0.1% to $1,914.08 an ounce, while gold futures expiring in December fell 0.3% to $1,941.95 an ounce by 00:30 ET (04:30 GMT). 

Jackson Hole, Powell speech in focus 

Markets were now focused squarely on an address by Federal Reserve Chair Jerome Powell at Jackson Hole, due later in the day.

Investors were largely on edge over potentially hawkish signals from the Fed chair, given that U.S. inflation remains sticky, while recent data also showed continued strength in the labor market.

While other readings also showed a slowdown in U.S. business activity, markets still expect the Fed chair to posit a higher-for-longer outlook for U.S. rates- a scenario that bodes poorly for gold.

Rising interest rates had pushed up the opportunity cost of holding gold over the past year, keeping gains in the yellow metal limited.

But the gold found some support this week, as weak business activity data spurred bets that the Fed had limited headroom to keep raising interest rates. 

Copper hit by growth concerns, China PMIs in focus 

Among industrial metals, copper prices fell on Friday and also trimmed a bulk of their recent gains as weak business activity data fueled concerns over slowing global economic growth.

Copper futures fell 0.3% to $3.7592 a pound, and were set to rise 1.4% this week. But futures were trading well below highs hit earlier in the week.

After weak purchasing managers’ index prints from the U.S., euro zone, and Japan this week, focus is largely on similar data from China, which is due next week. 

Markets will be watching to see whether economic conditions in the world’s largest copper importer improved through August, as it struggles with weak manufacturing activity and a looming real estate crisis.