The prices of gold and copper have muted on Wednesday ahead of a speech by Federal Reserve Chair Jerome Powell, but they were on track to post their best monthly gains of the year as a result of signs that the pace of U.S. interest rate increases is likely to slow in the months to come.
When he talks at a gathering in Washington later in the day, Powell is anticipated to give more hints about the state of the American economy and the direction of monetary policy for the rest of the year. Later this week, crucial U.S. payroll numbers will be released, and markets are anticipating them.
Although the minutes from the Fed’s November meeting indicated that more Fed members now favor modest rate increases in the near future, Fed speakers have cautioned that persistent inflation will probably keep U.S. rates high well into 2024. This had little effect on the month-long rise in metal prices because non-yielding assets like gold were greatly relieved by the prospect of a smaller rate hike in December.
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While gold futures prices dropped 0.1% to $1,747.30 per ounce, spot gold prices remained stable at around $1,748.99. Both securities increased by around 1% on Tuesday and were expected to increase by almost 7% in November, which would be their largest monthly gain since May 2021.
However, considering that U.S. inflation is currently running well beyond the Fed’s yearly target, the prognosis for gold is still limited.
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A scenario that is bad for gold could involve the central bank tightening monetary policy even further to drive prices down as a result of persistent inflation.
This year, the price of gold dropped precipitously as a result of rising interest rates that increased the opportunity cost of storing non-yielding assets. Copper prices among industrial metals decreased marginally on Wednesday, although they were also on track to have their best month since 2022.
After increasing by 0.7% in the previous session, copper futures decreased by 0.1% to $3.6405 per pound. However, November was expected to be their greatest month since early 2021, with a jump of around 8%.
Speculation on the easing of COVID-related restrictions in China, a key importer, helped to drive up copper prices. The COVID-19 pandemic has generated increased public resentment toward the nation that imports the most copper in the world, and this has led to rumors that the government will be compelled to halt its restrictive policies.
Beijing, however, has not yet made any such statement as the nation struggles to deal with a record-breaking daily increase in COVID-19 infections. As a result, strict movement restrictions were reinstated in a number of important cities over the past two months, which had a negative impact on China’s economy.
