Gold prices decreased marginally on Monday as investors remained cautious ahead of a crucial Federal Reserve meeting, while copper prices suffered significant losses due to worries over weakening Chinese demand.
Metal markets experienced some pressure as a result of the dollar’s recovery ahead of the Fed meeting, which saw the greenback move farther away from 15-month lows recorded earlier in July.
Nevertheless, despite growing speculation that the Fed could possibly indicate a stop in future rate hikes after one more boost this week, bullion prices continued to hover above a two-month high.
Gold futures decreased 0.2% to $1,963.35 an ounce by 20:44 ET (00:44 GMT), while spot gold decreased marginally to $1,961.66 an ounce.
Fed in the spotlight; widely anticipated 25 bps hike
Following a two-day meeting, the Fed’s decision on interest rates was the main topic of attention for the markets on Wednesday. It is commonly believed that the central bank will increase interest rates by 25 basis points.
Given that the Fed is nearing the conclusion of its almost 14-month rate hike cycle, investors are also wagering that the institution will declare a protracted pause in upcoming rate increases.
Given that rising interest rates increase the opportunity cost of investing in bullion, such a scenario is favourable for gold. However, considering that U.S. rates are also expected to stay higher for longer, it is doubtful whether the yellow metal will be able to regain record highs.
Given that U.S. inflation is still heading beyond the central bank’s 2% annual target, it is uncertain whether the Fed will stop raising interest rates.
On Monday, prices for silver and platinum, two other precious metals, declined. Platinum futures fell by 0.1% and 0.2%, respectively.
In addition to the Fed, this week’s monetary policy decisions are also expected from the European Central Bank and the Bank of Japan.
Copper holds steady after a sharp weekly decline, with China stimulus in focus.
Copper prices among industrial metals stabilised after falling by almost 3% during the previous week as markets continued to be preoccupied with China, a significant importer.
Futures for copper increased by 0.1% to $3.8223 a pound.
Weak economic data from China had caused significant drops in copper prices over the previous week as the world’s largest copper importer’s recovery ran out of steam.
Now that more stimulus measures are anticipated from the Chinese government to stimulate growth, the nation may import more copper.
However, Beijing’s previous week announced initiatives to boost consumer electronics and vehicle expenditure only offered modest assistance to the red metal.