Gold prices have remained relatively stable on Thursday but are struggling near six-month lows due to rising concerns about increasing U.S. interest rates, which are bolstering the dollar and pushing Treasury yields higher.
Both spot gold prices and gold futures have dipped below the critical $1,900 per ounce threshold this week as the dollar continues to rally and Treasury yields maintain their upward trajectory. The U.S. dollar has reached a 10-month high, while 10-year yields have surged to a 16-year peak.
Market sentiment has soured as oil prices hit their highest levels in 2023 on Wednesday, raising fears of persistent inflation and prolonged higher interest rates. Additionally, concerns about a potential U.S. government shutdown are keeping investors inclined toward safe-haven assets.
The dollar has been the primary beneficiary of increased demand for safe-haven assets, especially as the Federal Reserve signals a commitment to maintaining higher interest rates. Market expectations now include at least a 37% probability of a Fed rate hike in December, with rates projected to remain above 5% through 2024.
As of the latest data, spot gold has declined by 0.1% to $1,874.29 per ounce, while gold futures expiring in December remain unchanged at $1,890.95 per ounce as of 00:26 ET (04:26 GMT). Both instruments are trading near their weakest levels since mid-March.
Other precious metals have also felt the impact of the strong dollar, with silver futures down nearly 5% for the week and platinum futures falling by 4% during the same period.
In summary, gold prices are on track for a monthly decline of over 3% in September, marking their worst monthly performance since February. The outlook remains challenging for gold, given the expectation of higher interest rates, which increase the opportunity cost of investing in non-yielding assets. This trend has been a significant factor affecting gold throughout 2022 and is expected to continue limiting its gains.
Copper Prices Slide Amid Economic Concerns and China’s Property Woes
Copper prices are experiencing further declines on Thursday amid growing concerns that higher interest rates will negatively impact economic activity in the coming months.
Copper futures have fallen by 0.4% to $3.6292 per pound, approaching their lowest levels since mid-March. Worries about an economic slowdown in China, the world’s top copper importer, have also weighed on copper prices. Reports in the media have highlighted increased government scrutiny of embattled property developer China Evergrande Group (HK:3333), adding to the uncertainties in China’s property sector.
For the month of September, copper is set to record a 5% loss, reflecting the challenging conditions for industrial metals due to the combined effects of higher interest rates and economic uncertainties.
