Gold prices experienced a slight decline on Tuesday, continuing a four-session loss streak as investors remained cautious in anticipation of the upcoming Federal Reserve meeting. At the same time, copper demonstrated some strength as attention stayed fixed on Chinese stimulus measures.
The strength of the dollar and rising Treasury yields exerted pressure on metal prices, leading investors to shift towards the greenback in anticipation of the Fed meeting.
As a result of recent losses, gold retreated towards the $1,950 an ounce mark, which is expected to be a critical support level as markets anxiously await the Federal Reserve’s decision.
At 20:08 ET (00:08 GMT), spot gold experienced a minor drop to $1,954.34 an ounce, while gold futures expiring in August fell by 0.3% to $1,955.75 an ounce.
While the Federal Reserve is widely anticipated to raise interest rates by 25 basis points at the end of the two-day meeting on Wednesday, market players have likely already priced in this hike.
However, uncertainty looms among traders regarding the central bank’s signaling of its future rate hike plans. Fed Fund future prices suggest that an extended pause in the rate hike cycle is expected after the imminent hike.
Despite this, the possibility of at least one more rate hike this year remains open, particularly as U.S. inflation continues to trend above the Fed’s annual target.
The prospect of rising interest rates poses challenges for non-yielding assets like gold, as it increases the opportunity cost of holding bullion. This unfavorable dynamic has weighed on gold throughout 2022 and has limited its gains so far this year. The outlook for gold remains uncertain, as U.S. rates are expected to remain elevated for an extended period.
On the other hand, copper prices showed a slight increase on Tuesday, building on gains from the previous session after China, a major copper importer, signaled further policy support for its struggling economy.
Reports from state media indicated that China’s top leaders pledged additional assistance during a Politburo meeting, the top decision-making body of the Communist Party.
This move suggests increased spending in the world’s largest copper importer. However, it also comes amidst concerns about China’s property market being on the brink of a debt crisis and a notable slowdown in manufacturing activity within the country.
China-related worries have impacted copper prices this year, with the red metal facing challenges in its recovery. Copper futures managed a modest rise of 0.1% to $3.8528 a pound after a 0.6% gain in the previous session.
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