Gold prices, copper

Gold prices edged lower on Tuesday, erasing a brief recovery, as the focus of the market remained on negotiations regarding the U.S. spending limit. Meanwhile, copper steadied after experiencing significant losses in recent trading sessions.

The limited safe-haven demand for gold was influenced by optimistic remarks from both Democrat and Republican lawmakers, suggesting the potential for a deal. House Speaker Kevin McCarthy expressed that a U.S. default was improbable, further reducing the appeal of the precious metal.

Uncertainty surrounding the debt ceiling hindered gold’s support in the past week, leading to a decline from the record highs reached earlier in May due to profit-taking.

At 20:32 ET (00:32 GMT), spot gold slipped by 0.1% to $1,970.45 per ounce, while gold futures fell by 0.3% to $1,972.25 per ounce.

Additionally, other precious metals experienced a retreat, with platinum and silver futures declining within a narrow-to-lower range.

Regarding industrial metals, copper prices showed a slight increase on Monday but remained close to a seven-month low due to concerns about the debt ceiling and fears of a global economic downturn in recent sessions.

Copper futures rose by 0.1% to $3.6822 per pound. Throughout May, the red metal declined by over 5%, primarily influenced by discouraging economic indicators from China, which pointed towards a weakened demand for copper.

The persisting worries about slowing economic growth have negatively impacted industrial metal prices in recent weeks, with weak data from both the U.S. and China continuously affecting the market.

Furthermore, the resilience of the U.S. dollar has weighed on metal prices, as it has strengthened in recent sessions. Market participants anticipate that U.S. interest rates will remain higher for a more extended period.

This sentiment is reflected in Fed Fund futures, which indicate that traders are preparing for a potential pause in the Federal Reserve’s rate hike cycle in June while also lowering their expectations for any rate cuts this year. The Federal Reserve has downplayed the possibility of rate cuts in 2023.

The anticipation of elevated U.S. interest rates is unfavorable for non-yielding assets like metals since it increases the opportunity cost of investing in them. This trend, combined with the sharp rise in U.S. interest rates, significantly impacted metal prices throughout 2022.

Looking ahead, the market’s attention this week turns to additional U.S. economic indicators, as well as the release of the minutes from the Federal Reserve’s May meeting scheduled for Wednesday. Investors will closely monitor any indications that the Fed intends to pause its rate hike cycle in June.


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