Gold prices retreated from their one-month highs on Monday as traders decided to secure profits following two weeks of gains. Meanwhile, copper prices fell in response to weak economic growth data from China, a major importer.
During the past fortnight, metal prices experienced notable increases due to the declining value of the dollar, which hit a 15-month low, coinciding with a series of disappointing U.S. inflation readings. The underwhelming data also led to growing speculation that the Federal Reserve was nearing the conclusion of its rate hike cycle for the year.
However, the upward momentum of gold was somewhat curtailed by indications of resilience in the U.S. economy, which consequently dampened the demand for the safe-haven appeal of the precious metal. After reaching the $1,960 an ounce mark last week, gold prices have largely stagnated.
By 22:33 ET (02:33 GMT), spot gold had fallen by 0.2% to $1,951.51 per ounce, while gold futures dropped by 0.5% to $1,955.45 per ounce. Both instruments enjoyed a 1.6% surge over the past week.
Meanwhile, copper prices took a hit as China, the world’s leading copper importer, reported a substantial slowdown in economic growth during the second quarter. Copper futures slid by 0.7% to $3.9068 per pound after rallying nearly 4% in the previous week.
Government data unveiled on Monday revealed that China’s gross domestic product (GDP) barely expanded from the first quarter and fell short of expectations when compared to the same period last year. The country’s real estate sector, a key driver of copper demand, continued to grapple with weak sales and sluggish activity. Additionally, manufacturing activity remained in contraction over the past three months, raising concerns about the steady demand for copper amidst China’s decelerating growth.
Other economic indicators showed that Chinese industrial production witnessed slightly stronger growth than anticipated in June, while retail sales experienced a significant slowdown.
Despite these circumstances, trade data released last week indicated that Chinese copper imports remained robust in June, although this was partly attributed to manufacturers building up inventory due to weak spot copper prices.
In the backdrop of these developments, market focus remains on the upcoming late-July meeting of the Federal Reserve, where a rate hike is widely expected. However, there are growing expectations for an extended pause in the central bank’s rate hike cycle, considering the subdued inflation readings from the previous week.
Nevertheless, uncertainty persists as core U.S. inflation remains elevated, leaving markets unsure about whether the central bank will signal a pause. Federal Reserve officials have also provided mixed signals regarding future rate hikes.
The prospect of rising interest rates poses challenges for metal markets as it increases the opportunity cost of holding non-yielding assets. Nonetheless, the recent depreciation of the dollar has been highly advantageous for metal prices.
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