Gold prices have held mostly steady despite potential downside risks, driven by warnings from the Federal Reserve about the possibility of sustained higher interest rates. The strength of the US dollar and rising yields have also contributed to the current situation. In recent weeks, gold has exhibited minimal fluctuations within its trading range.
The Federal Reserve recently signaled the potential for further interest rate hikes later this year and suggested that any reduction in rates in 2023 may be less significant than previously anticipated, potentially leaving rates above the 5% threshold. This development has led investors to favor the US dollar as a safe-haven asset amid concerns of deteriorating global economic conditions.
Major economies are experiencing a resurgence in inflation, primarily driven by surging oil prices, which could potentially hinder economic growth in the current year. Against this backdrop, and amidst growing concerns of a US government shutdown, gold has found some support.
Meanwhile, industrial metals witnessed limited movement on Monday due to escalating concerns about additional economic challenges in China. Last week, the London Metal Exchange (LME) experienced declines in copper and nickel prices. These concerns were exacerbated by the announcement from China Evergrande Group, a struggling property developer, that it was unable to issue new debt due to an ongoing government investigation into one of its subsidiaries.
China’s property sector has grappled with a cash crunch lasting three years, receiving limited fiscal support from Beijing. Attention this week will be focused on the release of Chinese purchasing managers’ index (PMI) data, scheduled for Friday, to gain further insights into business activity.
In the oil markets, prices rose on Monday as investors turned their attention back to tighter supply outlooks. This shift followed Moscow’s temporary ban on fuel exports and concerns about potential further interest rate hikes that could dampen demand.
Crude oil contracts snapped a three-week winning streak last week, dropping after the Federal Reserve adopted a hawkish stance, which roiled global financial markets and raised questions about oil demand. The previous four weeks had seen oil prices surge by more than 10% on the back of predictions of a substantial crude supply deficit in the fourth quarter, thanks to Saudi Arabia and Russia’s extension of additional supply cuts through year-end.
Last week’s move by Moscow to temporarily halt gasoline and diesel exports to most countries aimed to stabilize its domestic market. Market participants anticipate further updates on stock market trends and developments in business, politics, technology, sports, and the automotive industry in the days ahead.
