Gold prices held steady on Wednesday, maintaining recent gains, as concerns about a possible recession in the euro zone, prompted by a series of lackluster economic reports, continued to support safe-haven demand.
Gold’s Resilience: Gold prices showed limited movement, with most recent gains being sustained. The market saw solid support from investors seeking safe-haven assets due to mounting concerns about a potential recession in the euro zone, a sentiment triggered by a string of underwhelming economic data.
Headwinds and Safe-Haven Demand: While gold remained resilient, substantial gains were restrained by persistent apprehensions regarding higher U.S. interest rates. Recent data released on Tuesday indicated an improvement in local business activity in October, further fueling these concerns. The U.S. dollar firmed during overnight trading, and Treasury yields stabilized following recent declines.
Israel-Hamas Conflict: Safe-haven demand for gold declined slightly during the week as signs of de-escalation emerged in the Israel-Hamas conflict, with Israel postponing a planned ground assault on Gaza.
Euro Zone Recession Concerns: Conversely, this decline in safe-haven demand was partly offset by discouraging purchasing managers index data from the euro zone, raising worries of a potential recession in the region. Germany, as Europe’s largest economy, had already entered a recession earlier in the year.
Gold’s Price Range: Gold remained within reach of the $2,000 per ounce level. However, reaching this threshold in the near term remained uncertain, especially with several more significant U.S. economic indicators slated for release during the week.
Price Movements: Spot gold posted a 0.1% increase, reaching $1,972.51 per ounce, while gold futures expiring in December fell by 0.2% to $1,983.15 per ounce by 01:10 ET (05:10 GMT).
Upcoming Economic Data: The market’s focus was primarily on forthcoming U.S. economic cues. The release of third-quarter gross domestic product (GDP) data on Thursday was anticipated, and it could provide insights into the resilience of the U.S. economy, affecting the Federal Reserve’s monetary policy. Strong economic performance allows the Fed to maintain higher interest rates for a more extended period, thereby diminishing gold’s safe-haven appeal.
Inflation Data: Following the GDP reading, attention would turn to the PCE (Personal Consumption Expenditures) inflation data on Friday, the preferred inflation gauge of the Federal Reserve. Recent months had seen an uptick in U.S. inflation, bolstering the case for a hawkish stance by the Fed.
Fed’s Monetary Policy: The central bank was scheduled to meet next week to decide on interest rates. While it was widely expected that the Fed would keep rates unchanged, indications from Fed officials pointed to at least one more rate hike this year. Higher interest rates tend to reduce the attractiveness of non-yielding assets like gold.
Copper Prices: In the realm of industrial metals, copper prices registered a slight decline on Wednesday, with minimal support from China’s plans to increase infrastructure spending. Copper futures fell by 0.2% to $3.6247 per pound.
China’s Stimulus: China announced its intention to issue 1 trillion yuan ($1=7.3 yuan) in bonds this year to boost infrastructure spending, primarily focusing on disaster repair and relief. Despite this announcement, copper’s response was limited, with concerns about a euro zone recession implying weaker industrial demand in the region over the coming months.
