Gold prices saw a slight increase on Monday, building on previous gains, as mixed U.S. labor data solidified expectations that the Federal Reserve would maintain its current interest rates. This expectation put pressure on the U.S. dollar and Treasury yields, making gold more attractive due to the prospect of fewer increases in its opportunity cost.
Copper also benefited from the softer dollar, with growing optimism surrounding additional stimulus measures in China, one of the world’s major copper importers. Additionally, signs of a recovery in Chinese business activity contributed to copper’s gains.
Market focus now turns to economic indicators from China this week, along with any signals related to the U.S. economy and future rate hikes. However, trading in metal markets is expected to be somewhat limited on Monday due to a U.S. market holiday.
Spot gold increased by 0.2% to reach $1,944.80 per ounce, while gold futures expiring in December rose by 0.2% to $1,970.95 per ounce as of 00:23 ET (04:23 GMT).
Gold Bolstered by Speculation of a Fed Rate Pause
Gold experienced a strong recovery over the past week as a series of mixed U.S. economic data releases suggested that the Federal Reserve may have limited room to continue raising interest rates. While nonfarm payrolls increased in August, the unemployment rate also rose.
The central bank is now widely expected to keep rates steady in September and may even announce an end to its current rate hike cycle. However, U.S. interest rates are likely to remain at levels higher than those seen over the past 20 years for an extended period, given the persistent inflation in the United States. This scenario offers only limited upside for gold, as higher interest rates increase the opportunity cost of holding the precious metal.
Market participants are looking to various Fed speakers scheduled for this week for further insights into monetary policy and additional economic indicators from the United States.
Copper Nears One-Month High on China’s Stimulus Hopes
Copper prices rose on Monday, approaching a one-month high, driven by growing optimism about an economic recovery in China, a major importer of the metal.
Copper futures gained 0.3% to reach $3.8628 per pound.
Investors are eagerly anticipating further stimulus measures from Beijing, particularly those aimed at supporting China’s property market as the government seeks to bolster a slowing economic recovery. Recent developments include Chinese banks cutting yuan deposit rates and the People’s Bank easing some mortgage requirements. Sentiment toward the property market was also boosted by beleaguered developer Country Garden Holdings reaching an agreement with debtholders to defer certain payments.
This week, market attention will focus on Chinese trade and inflation data, which will provide more insights into the world’s largest copper importer’s economic trends.
