Gold prices gained in Asian trade on Thursday, supported by a slightly weaker U.S. dollar as markets resumed activity following the Christmas holiday. However, the increase was limited as investors remained cautious due to the U.S. Federal Reserve’s recent hawkish stance.
Trade volumes were thin, with many traders opting to refrain from making large bets during the holiday-shortened week.
Spot gold rose 0.4% to $2,627.55 per ounce, while February gold futures increased by 0.1%, reaching $2,643.86 per ounce by 00:00 ET (05:00 GMT).
Geopolitical developments in the Middle East also played a role in gold’s gains. Tensions escalated between Palestinian militant group Hamas and Israel, with both sides accusing each other of obstructing a ceasefire agreement. Hamas blamed Israel for imposing additional conditions, while Israeli Prime Minister Benjamin Netanyahu accused Hamas of backtracking on prior agreements.
Gold is often viewed as a safe-haven asset during times of geopolitical uncertainty, which helped support its price.
Dollar Weakens But Remains Near Two-Year High
The U.S. dollar index was slightly lower during Thursday’s Asian session, but it remained close to the two-year high it reached last week. The Fed‘s hawkish policy shift last week had bolstered the dollar, as higher interest rates made dollar-denominated assets more attractive to investors.
A stronger dollar typically puts downward pressure on gold prices, as it makes the metal more expensive for holders of other currencies.
Gold prices had dropped sharply last week after the Federal Reserve signaled that interest rates would remain elevated for an extended period. The higher rates reduce the appeal of non-interest-bearing assets like gold, as they increase the opportunity cost of holding the metal in comparison to interest-bearing assets such as bonds.
Gold has experienced only marginal price movements this week after losing more than 1% the previous week, reflecting market uncertainty over the metal’s future outlook.
Other Precious Metals Show Limited Movement
Other precious metals showed little change on Thursday. Platinum futures were flat at $960.20 per ounce, while silver futures remained steady at $30.273 per ounce.
Copper Prices Edge Up Amid China Stimulus
Copper prices inched higher on Thursday after reports that Chinese authorities planned to issue a record 3 trillion yuan ($411 billion) in special treasury bonds next year to stimulate the struggling economy.
Despite the positive news, copper’s gains were capped by the strength of the U.S. dollar. Analysts also noted seasonal sluggishness in the copper market, as industrial production and construction projects typically slow toward the year-end holidays.
The most-traded January copper contract on the Shanghai Futures Exchange (SHFE) rose 0.2% to 74,220 yuan per ton. Benchmark copper contracts on the London Metal Exchange were closed for the holiday.
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