Gold prices dipped below significant levels on Tuesday as concerns over the Israel-Hamas conflict eased, leading to a decrease in safe-haven demand. Simultaneously, anticipation of an upcoming Federal Reserve meeting kept traders leaning toward the U.S. dollar.
While the Israel-Hamas conflict continued without signs of de-escalation, traders began factoring in a reduced risk premium associated with the conflict, as no other Arab nations had joined in the hostilities so far. This caused gold to retrace some of the gains it had made earlier in October when the conflict began.
The strength of the dollar, ahead of the Federal Reserve meeting, also exerted downward pressure on gold prices. Traders shifted into the greenback in preparation for any hawkish surprises that might emerge from the meeting.
Spot gold declined by 0.2% to $1,992.88 per ounce, while gold futures expiring in December dropped by 0.2% to $2,002 per ounce as of 01:00 ET (05:00 GMT).
Federal Reserve Meeting Takes Center Stage as Gold Marks Strong October
Gold prices trended lower this week, with the primary focus shifting to the Federal Reserve’s decision on interest rates scheduled for Wednesday.
While the central bank is widely expected to maintain its benchmark interest rate, it is also anticipated to reaffirm its commitment to a “higher-for-longer” stance on rates, given recent indicators of persistent U.S. inflation and the economy’s resilience.
This scenario is likely to limit significant upward movements in gold prices, as higher interest rates increase the opportunity cost of investing in bullion. This trend has weighed on gold throughout the past year, constraining its advances toward the $2,000-an-ounce level.
Nevertheless, due to safe-haven demand stemming from the Israel-Hamas conflict, gold prices enjoyed a 6% to 8% increase in October, marking their most substantial monthly gain since March. In 2023, the precious metal has also risen by nearly 10%.
Copper Prices Decline on Disappointing Chinese PMI Data
Among industrial metals, copper prices experienced a decline on Tuesday following disappointing economic data from China, a major copper importer.
Copper futures fell by 0.5% to $3.6377 per pound.
Purchasing managers index (PMI) data revealed that Chinese manufacturing activity unexpectedly contracted in October, while the non-manufacturing sector expanded at a slower-than-anticipated pace.
These figures underscored that Beijing’s stimulus efforts provided only limited support to the Chinese economy. Other factors, notably a real estate crisis and weak trade, were also impeding growth.
These developments raise questions about the sustainability of copper demand in the coming months.
