Gold prices remained just above their two-month lows on Thursday, maintaining a steady pattern observed in recent weeks as the market eagerly anticipated an upcoming Federal Reserve meeting.
Copper prices experienced a slight decline due to weak economic indicators emerging from China, leading to concerns about sustained demand from the largest importer of the red metal.
Gold in a Holding Pattern as Fed Meeting Nears
The price of gold has remained within a narrow trading range for nearly three weeks, facing pressure from a resurgent dollar and rising treasury yields. Market speculations about the Federal Reserve’s stance on further interest rate hikes have contributed to this trend.
Gold futures fluctuated between the range of $1,940 to $2,000 per ounce, while spot gold stayed within $1,930 to $1,980 per ounce since mid-May.
Surprising interest rate hikes in Australia and Canada have raised expectations that the Federal Reserve might follow suit, considering that the United States is experiencing higher-than-targeted inflation and a robust labor market.
However, recent months have seen a significant slowdown in U.S. economic growth, limiting the Federal Reserve’s room to continue raising rates.
Higher interest rates adversely affect non-yielding assets like gold as they increase their opportunity cost. Even if the Federal Reserve announces a pause in rate hikes next week, it is anticipated that U.S. rates will remain elevated for an extended period, thereby exerting pressure on metal markets.
Spot gold saw a modest increase of 0.3%, reaching $1,944.06 per ounce, while gold futures stabilized at $1,959.65 per ounce by 20:06 ET (00:06 GMT).
Nonetheless, analysts believe that gold could benefit from safe haven demand in the event of a U.S. recession later this year. However, in the meantime, the strength of the dollar is expected to limit significant gains in the price of gold.
Copper Affected by Weak Chinese Signals
In the realm of industrial metals, copper prices slightly declined on Thursday, extending losses from the previous session due to below-expectation trade data from China, which pointed to additional challenges for copper demand.
Copper futures dropped by 0.1%, reaching $3.7532 per pound, after experiencing a 0.5% loss on Wednesday.
Chinese data revealed a 4.6% decrease in copper imports in May compared to the previous month, while the country’s overall trade surplus reached its lowest level in 13 months.
Although there were some indications of improvement in overall imports, the unexpectedly sharp decline in exports suggests near-term economic difficulties, particularly for China’s extensive manufacturing sector.
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