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Gold and Copper Market Trends
Friday observed gold prices adhering to a narrow range and heading towards a consecutive second week of decline. As traders await further insights into U.S. interest rate adjustments, anxiety levels grow. The spotlight is now on critical inflation information and a forthcoming Federal Reserve meeting.
Nevertheless, copper prices exhibited an opposite trend, with a strong performance throughout the week. This upward momentum followed China's introduction of additional stimulus measures, intensifying the prospects of robust demand for copper.
Impact of China's Stimulus Measures
China's stimulus initiatives resulted in an elevation of risk appetite. This, in conjunction with a succession of record highs on Wall Street, further diminished gold demand. Bullion prices were additionally impacted by US dollar strength, an effect of stronger-than-predicted GDP data, sustaining a trading margin between $2,000 and $2,050 over the previous week.
Gold and Inflation: What’s to Come?
Spot gold was steady at $2,021.41 an ounce, with gold futures for February experiencing a 0.2% increase to $2,021.10 an ounce. Both variants witnessed a decrease of about 0.3% in the same week. Despite this, larger losses in the yellow metal were mitigated by safe-haven demand, a response to escalating Middle East conflict, particularly the war between Israel and Hamas.
Eyes are focused on further hints of U.S. monetary policy, starting with the PCE price index data, or Fed’s preferred inflation measure. The data due later on Friday is suspected to confirm persistent inflation throughout December.
Fed Meeting and its Implications
The Federal Reserve meeting scheduled for next week is expected to maintain the status quo when it comes to rates. This foreseeability on rate holds even extends to the March meeting of the central bank, substantially altering its former expectations of a 25 basis point reduction. The prospect of heightened U.S. rates for an extended period is detrimental to gold prices, as it increases the missed opportunity cost for investing in the yellow metal.
Copper Prices and China
Moving to copper futures for March, there was a 0.2% slip to $3.8617 per pound, but they are still projected to augment by over 2% this week after achieving three-week highs. The robust performance of copper was primarily stimulated by China's additional monetary relief, dampening fears of an impending demand downfall.
However, skepticism remains concerning the potential economic boost these monetary stimulants can provide– considering China's battle with a severe retrenchment in consumer and business outlays. The non-materialized post-COVID economic rebound in 2023 further fuels a predominantly negative sentiment toward China.
Analysts are now focused on the forthcoming purchasing managers index data from China due the following week to garner more indications about the nation's economic health.
