Gold Prices Hold Steady at 3-Week High as Dollar and Yields Dip on Weak Data

Gold prices have maintained their stability at a three-week high, benefitting from a softer dollar and weaker-than-expected U.S. economic data. This has led to speculation that the Federal Reserve might have limited room to continue raising interest rates.

A Week of Strong Performance

The value of the yellow metal experienced a significant surge over the past week, driven partly by safe-haven demand due to heightened uncertainty surrounding the U.S. economic outlook.

Clouded Gains

Despite this recent uptrend, the potential for further increases in gold prices is muddled by the possibility of U.S. interest rates being high for a prolonged period of time. A series of economic indicators scheduled for release this week will contribute to shaping the rate outlook.

Spot gold saw a marginal decline of 0.1%, resting at $1,936.45 per ounce, while gold futures set to expire in December also slipped by 0.1%, trading at $1,963.85 per ounce as of 00:33 ET (04:33 GMT). Both of these metrics had surged by nearly 1% each on the previous day and reached their highest levels since early August.

Awaiting Economic Data and Watching Dollar and Yields

The U.S. dollar, as well as Treasury yields, managed to stabilize after recent losses. These losses had been triggered by disappointing figures related to job openings and consumer confidence in the prior session.

Attention is now focused on significant economic indicators, including a revised reading on second-quarter economic growth slated for later in the day. On Thursday, investors anticipate personal consumption expenditures data, which the Federal Reserve considers its preferred measure of inflation. Furthermore, Friday will see the release of the August nonfarm payrolls, a pivotal report for gauging labor market activity.

The implications are clear: any indications of a slowdown in U.S. inflation or labor market vitality provide the Federal Reserve with fewer reasons to proceed with raising interest rates. Nevertheless, considering the central bank’s commitment to an extended period of higher rates, the relief for gold is projected to be constrained until the Federal Reserve decides to initiate rate reductions in the upcoming year.

Impact of Higher Rates on Gold

The upward trajectory of interest rates heightens the opportunity cost associated with investing in non-yielding assets. This shift in dynamics has notably impacted gold’s performance over the last year.

Copper Takes a Hit Amid Economic Uncertainty

In the realm of industrial metals, copper prices declined on Wednesday, relinquishing some of the gains garnered earlier in the week. This retreat was attributed to concerns over a slowdown in economic activity, fueled by the discouraging U.S. data.

Though the depreciation of the dollar cushioned losses in the copper market, lingering uncertainty over major importer China weighed on the red metal. The lack of clear indications from Beijing regarding fiscal support for the economy further contributed to this unease.

Key Data from China

The focus has now shifted to the release of key purchasing managers’ index data from China, scheduled for Thursday. This data is anticipated to provide insights into business activity in the largest copper-importing nation worldwide.

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