Gold prices underwent a minor decrease on Monday amidst the prevailing uncertainty regarding the Federal Reserve’s stance on interest rates later this month. Simultaneously, concerns surrounding weakening economic growth contributed to the decline in copper prices.
The yellow metal saw a decline on Friday after the May U.S. nonfarm payrolls data exceeded expectations, signaling a more hawkish outlook for the Fed in its efforts to combat high inflation. However, certain Fed officials suggested the possibility of maintaining interest rates in June, intending to assess the impact of their monetary tightening measures implemented over the past year.
Irrespective of the decision made in June, the central bank is likely to sustain higher rates for an extended period. Unfortunately, this scenario does not favor non-yielding assets like gold. The strength of the dollar, bolstered by the prospect of elevated interest rates, weighed down on the prices of gold on Monday.
Furthermore, the passage of a bill by the U.S. government to raise the debt ceiling resulted in increased risk appetite among investors, diverting their attention from risk-averse assets such as gold.
At 21:14 ET (01:14 GMT), spot gold experienced a slight dip to $1,947.89 per ounce, while gold futures declined by 0.3% to $1,963.90 per ounce. Both instruments were trading in close proximity to their lowest levels in over two months.
Fed Fund futures prices indicate that the markets are estimating an almost 80% likelihood of the Fed maintaining steady rates in June. However, considering recent inflation and labor data surpassing market expectations, there remains a possibility of the bank implementing further rate hikes.
Gold is still anticipated to benefit from increased demand as a safe haven this year, particularly as global economic conditions worsen under the pressure of high interest rates.
However, this notion had a significant impact on copper prices, which experienced a retreat on Monday. Copper futures dropped by 0.4% to $3.7180 per pound.
Copper prices have been battered in recent weeks due to a series of weak economic indicators from the U.S., eurozone, and China. As a result, they have reached six-month lows, causing concerns of a decline in demand for this red metal.
This week, market focus will center around updates from the world’s largest economies, including trade data from China and U.S. service sector activity.
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