Gold prices experienced a reversal on Monday, pausing their recent ascent driven by safe-haven demand. The precious metal’s robust gains were largely attributed to the Israel-Hamas conflict, which had sent investors flocking to safety.
Spot gold fell 0.7% to $1,920.07 per ounce, while December gold futures dipped 0.4% to $1,933.15 per ounce by 00:15 ET (04:15 GMT). This retracement followed a remarkable 5% surge in the preceding week. Market observers are now closely monitoring the potential spillover of the Israel-Hamas conflict into the broader Middle East region, as Israel readies itself for a ground offensive in the Gaza Strip.
One factor that has hampered gold’s appeal is the higher U.S. interest rate outlook. Stronger-than-expected U.S. inflation data released last week reinforced expectations of a prolonged hawkish stance by the Federal Reserve, which is likely to keep interest rates at elevated levels for an extended period. This outlook has weighed on gold prices over the past year and is expected to curtail any substantial upside potential for the precious metal.
While gold initially enjoyed significant gains due to safe-haven demand, the U.S. dollar remained the preferred safe-haven asset for many investors. The influx of capital into the greenback propelled it to nearly a 10-month high last week. Higher interest rates pose a challenge for gold, as they increase the opportunity cost of holding the precious metal. Despite the worsening global economic conditions and heightened safe-haven demand, this has limited gold’s capacity to make significant gains.
In contrast, copper prices staged a robust rebound on Monday, recovering from a near five-month low recorded in the previous week. Copper futures surged by 0.5% to reach $3.5907 per pound. Market attention this week is squarely focused on key economic indicators emerging from China, a major importer of copper. Specifically, the release of China’s third-quarter gross domestic product figures is highly anticipated. Analysts expect that this data will reveal a further weakening in Chinese economic growth, reflecting a lack of substantial improvements in business activity despite previous stimulus measures. This trend is detrimental to Chinese copper demand and could lead to further weakness in copper prices in the coming weeks. Concerns about China’s economic performance have been a significant dampener on copper prices over the past year.
The People’s Bank of China is also expected to announce its decision on key loan prime rates this week. However, market consensus suggests that a change in these rates is unlikely.
