Gold and copper prices experienced a slight decline in Asian trade on Friday as market participants prepared for the release of key non-farm payrolls data, seeking further insights into the state of the U.S. economy. Despite this, both metals demonstrated a strong recovery from recent lows over the course of the week.
Gold received support from a renewed belief that the Federal Reserve would maintain interest rates at their current levels during the June meeting.
Weak labor and manufacturing data further bolstered these expectations, contributing to a significant drop in the value of the dollar on Thursday, as certain Fed officials suggested the possibility of keeping rates steady in June.
The ongoing progress towards raising the U.S. debt ceiling also diminished the demand for the dollar as a safe haven asset.
The weakened outlook for the dollar prompted some investors to shift their focus towards gold, aiding the metal in recovering from its lowest levels in over two months. However, caution prevailed on Friday as the release of nonfarm payrolls data for May approached.
Spot gold experienced a minor 0.1% decline, reaching $1,976.36 per ounce, while gold futures also fell 0.1% to $1,993.60 per ounce after briefly surpassing the $2,000 mark on Thursday. Both instruments had recorded gains between 1.5% and 2.5% throughout the week.
The upcoming payrolls data is expected to reveal a cooling labor market in May, thereby increasing the likelihood of the Federal Reserve maintaining interest rates. Nevertheless, investors remained apprehensive, given that the data has shown upside surprises in 12 out of the past 13 months.
Despite this uncertainty, market indicators such as Fed Fund futures prices suggest that there is a nearly 74% chance of the Fed keeping rates unchanged on June 14. Higher interest rates diminish the appeal of non-yielding assets like metals, reducing their attractiveness to investors.
As global economic conditions worsen, the demand for gold as a safe haven asset is anticipated to rise later this year.
Conversely, the prospects for industrial metals have been adversely affected by this notion, as seen in the recent decline of copper prices to six-month lows due to weaker-than-expected official manufacturing activity data from China.
However, on Thursday, copper experienced a significant rally following a private survey indicating signs of resilience in the country’s manufacturing sector, potentially signaling a recovery in the coming months.
Copper futures declined by 0.3% to $3.7030 per pound on Friday after surging 2% in the previous session.
Nevertheless, the outlook for copper remains grim this year, as global manufacturing activity continues to decline steadily under the pressure of high interest rates and inflation.
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