Gold sees some relief as dollar falls, rate hike fears cloud outlook

Investing.com -- Gold prices rose slightly on Friday, recovering from a five-month low as the dollar saw some profit taking, although concerns over higher U.S. interest rates kept metal markets under pressure.

Prices were set for a fourth straight week of losses, as strong labor market data and hawkish signals from the Federal Reserve kept markets positioning for higher U.S. interest rates.

Spot prices also lost the key $1,900 an ounce level this week, which could herald more near-term weakness for the yellow metal.

Spot gold rose 0.2% to $1,893.05 an ounce, while gold futures expiring in December rose 0.4% to $1,922.15 an ounce by 00:00 ET (04:00 GMT). Both instruments were set to lose over 1% this week. 

Dollar dip offers some relief to gold, but outlook dim 

The dollar fell 0.3% in Asian trade amid some profit taking, after the greenback raced to over two-month highs against a basket of currencies. 

The dollar was also set for a 0.5% gain this week, as strong U.S. economic readings and hawkish signals from the minutes of the Fed’s July meeting pushed up bets that U.S. rates will remain higher for longer.

While the Fed has flagged only one more hike this year, the prospect of higher-for-longer U.S. rates bodes poorly for gold markets, given that it pushes up the opportunity cost of holding non-yielding assets. This trade had battered gold through 2022, and has so far limited any major gains in the yellow metal this year. 

Anticipation of more monetary policy and economic cues from the Jackson Hole Symposium next week also kept positioning skewed largely towards the dollar, and kept investors wary of metal markets. 

Gold was also pressured by a spike in U.S. Treasury yields, with the 10-year rate surging to levels last seen during the 2008 financial crisis. 

Copper buoyed by China stimulus hopes, but weekly losses on tap

Copper prices rose on Friday, taking some support from signals of more stimulus support in China. 

Copper futures rose 0.2% to $3.6932 a pound. But futures were still set to lose about 0.7% this week.

Prices of the red metal rebounded from an over two-month low on Thursday, after China’s central bank vowed to release more liquidity to support a slowing economic recovery.

The People’s Bank is now widely expected to cut its loan prime rates on Monday, as the world’s largest copper importer struggles with a slowing post-COVID economic recovery.