Gold prices exhibited a slight recovery on Thursday, finding support around the $2,000 an ounce level after a recent sharp decline. The precious metal faced headwinds this week, erasing most gains from December, as robust U.S. economic data heightened skepticism about potential early interest rate cuts by the Federal Reserve.
Spot gold inched up 0.1% to $2,008.89 an ounce, while February gold futures rose 0.2% to $2,010.40 an ounce, recovering mildly from nearly 2% declines for the week.
The resurgence of the dollar and increased Treasury yields this week, fueled by strong retail sales data for December, contributed to gold’s recent downward trajectory. The dollar reached one-month highs, and traders scaled back expectations of an early rate cut by the Fed in March 2024, now pricing in a 59.8% chance, down from 67.3% the previous week.
The notion of higher rates for longer undermines the appeal of gold, as it raises the opportunity cost of holding the precious metal. Despite a brief relief for gold in December with record highs amid anticipations of early rate cuts, the current uncertain outlook is shaped by the prospect of prolonged higher interest rates.
In contrast to gold, copper prices steadied on Thursday after experiencing significant losses during the week. Copper futures for March dipped 0.1% to $3.7395 a pound, trading close to their lowest levels since early December. Worsening sentiment towards China and pressure from the dollar contributed to the decline, exacerbated by weaker-than-expected GDP figures for the fourth quarter in China and subdued forecasts for electric vehicle sales, initially anticipated to drive copper prices in the near future.
