Asian Markets Witness Gold Price Slump in Response to Dollar Rebound and Fed Speakers Focus
Gold prices experienced a notable decrease in the Asian trading session on Tuesday, as the market responded to a resurgence in the value of the US dollar and Treasury yields. This dip in gold’s value precedes a series of important addresses by Federal Reserve officials scheduled for later in the week.
In the realm of industrial metals, copper prices also faced a sharp decline after trade data from China, a major importer, fell significantly short of expectations.
The dollar staged a recovery, rebounding from a six-week low during overnight trading. This resurgence was triggered by Minneapolis Fed President Neel Kashkari’s cautionary statement, suggesting it was premature to conclude the Federal Reserve’s rate hike cycle. Kashkari’s remarks led to a scaling back of wagers on a sustained pause in the Fed’s interest rate policies for the remainder of the year. Furthermore, they induced substantial losses in non-yielding assets, with gold being particularly sensitive to interest rate movements over the past year.
In this scenario, spot gold declined by 0.3% to reach $1,971.43 per ounce, while gold futures expiring in December witnessed a 0.5% drop to $1,977.95 per ounce by 00:15 ET (05:15 GMT).
Gold’s recent decline can be attributed, in part, to traders factoring in a reduced risk premium associated with the yellow metal in light of the Israel-Hamas conflict. The absence of a significant escalation in the conflict led to diminished demand for gold as a safe haven asset.
Federal Reserve Speakers Awaited, with Powell at the Helm
Market participants are now eagerly anticipating speeches from a lineup of prominent Federal Reserve officials scheduled for the week. Of particular interest is Chair Jerome Powell, who is set to address two separate events on Wednesday and Friday. Traders will closely scrutinize Powell’s statements to determine whether he continues to adopt a hawkish stance, as he did in the prior week, or if he tempers this stance in response to a cooling labor market.
While Powell had predominantly maintained his hawkish position during the previous week’s meeting, the financial markets interpreted his comments as a sign that the Federal Reserve might be contemplating a pause, especially following data revealing a larger-than-expected decline in October’s nonfarm payrolls. However, this interpretation provided only limited support to gold prices, as traders predominantly shifted their focus to assets driven by risk. The outlook for gold also remained subdued, considering that US interest rates are projected to remain elevated for an extended period.
Beyond Chair Powell, other Federal Reserve officials, such as Austan Goolsbee, Christopher Waller, and Lorie Logan, are also scheduled to deliver speeches this week.
Copper Experiences Decline Following Disappointing China Trade Data
Copper prices witnessed a substantial decline on Tuesday, reversing some of the gains made in the past week. This downturn was triggered by data indicating that China’s exports in October fell more significantly than anticipated, while the country’s trade surplus reached its most unfavorable level in 17 months.
Copper futures registered a 0.5% decline, trading at $3.6922 per pound.
Although Chinese copper imports in October surged to a 10-month high, concerns arose due to the weakness in exports, signaling a potential slowdown in China’s primary economic drivers. These import figures were primarily boosted by a series of stimulus measures implemented by Beijing in recent months, which are expected to contribute to an uplift in the Chinese economy in the coming months. Nonetheless, year-to-date copper imports remained nearly 7% lower, indicating a cooling demand in the world’s largest copper importer.
