September 1, 2023
Gold prices have stabilized near three-week highs as markets await further guidance on U.S. monetary policy, with nonfarm payrolls data scheduled for release later in the day. Copper prices have risen due to positive Chinese factory data.
Gold has experienced a strong rally this week, driven by a series of weak U.S. economic indicators that have increased expectations that the Federal Reserve will maintain interest rates in September. This sentiment has weighed on the U.S. dollar.
However, the dollar rebounded on Thursday following data showing that personal consumption expenditures, the Fed‘s preferred inflation gauge, remained elevated in July. Additionally, personal spending exceeded expectations. As a result, gold has consolidated some of its weekly gains.
As of 00:59 ET (04:59 GMT), spot gold was steady at $1,940.14 per ounce, while gold futures expiring in December remained flat at $1,966.55 per ounce. Both gold instruments were still trading up by 1% to 3% for the week.
The focus is now on the nonfarm payrolls data for August, which is expected to show a weakening job market compared to the previous month. However, markets are cautious about any potential upside surprises, as payrolls have consistently outperformed expectations this year.
Strong employment figures and persistent inflation would provide the Federal Reserve with the flexibility and motivation to maintain higher interest rates. While the central bank may not raise rates in September, it is expected to keep interest rates at relatively high levels for an extended period.
Gold’s near-term prospects have been dimmed by the expectation of prolonged higher interest rates, which increase the opportunity cost of holding non-yielding assets like gold. However, gold may still find support if global economic conditions deteriorate due to the impact of these high rates.
Copper prices have risen as a result of positive data indicating that China’s manufacturing sector unexpectedly grew in August, according to a private survey. This data, along with Beijing’s stimulus measures, has improved sentiment toward copper, a key industrial metal. China recently implemented looser mortgage requirements for its property sector and adjusted deposit and reserve rates to boost local liquidity.
Copper futures have increased by 0.5% to reach $3.8525 per pound and are set to record a 2.4% gain for the week.
