In a reversal of fortune, gold prices saw a decrease on Monday following a period of robust gains driven by increased safe-haven demand. All eyes remain fixed on the potential impact of the Israel-Hamas conflict.
The precious metal experienced a brief bout of profit-taking after surging more than 5% in the previous week. The eruption of the Israel-Hamas war had prompted investors to seek refuge in safe-haven assets.
Markets are currently closely monitoring the possibility of the Israel-Hamas conflict spilling over into the broader Middle East region, particularly as Israel readies for a ground offensive in the Gaza Strip.
Gold’s most active futures contract on New York’s Comex, set for December, concluded the day down $7.20 or 0.4% at $1,934.30 per ounce.
The spot price of gold, closely followed by some traders, settled at $1,919.46.65 by 15:50 ET (19:50 GMT), marking a decline of $13.36 or 0.7% for the day.
Impact of U.S. Interest Rate Outlook on Gold
Last week, stronger-than-expected U.S. inflation data hinted at a sustained hawkish stance from the Federal Reserve, likely resulting in higher interest rates for a more extended period. This expectation has exerted downward pressure on gold prices over the past year and is expected to hinder any significant upward movement in the yellow metal.
Although gold experienced some notable gains due to safe-haven demand, the U.S. dollar has remained the preferred safe haven of choice for many. Inflows into the greenback propelled it close to a 10-month peak last week. The prospect of higher interest rates presents a challenge to gold, as it elevates the opportunity cost of investing in the precious metal. This factor has constrained substantial gains in gold, despite worsening global economic conditions, which have heightened safe-haven demand.
Copper Makes a Recovery with China’s GDP in Focus
In the realm of industrial metals, copper prices exhibited a rebound on Monday after nearly touching a five-month low in the previous week.
Copper futures concluded with a 0.1% increase at $3.5820 per pound in New York trading.
The focus for this week revolves around pivotal economic indicators from China, a major importer of copper. Of primary importance is the reading on third-quarter gross domestic product (GDP).
Expectations are that the GDP report will underscore a further weakening of Chinese economic growth in the preceding quarter, as business activity displayed few signs of improvement despite some stimulus measures.
This trend does not bode well for Chinese copper demand and may introduce additional weakness in the red metal over the coming weeks. Concerns related to China have been a significant damper on copper prices over the past year.
Additionally, the People’s Bank of China is anticipated to make a decision on its key loan prime rates during this week, although a change in rates seems unlikely at this juncture.
