Gold prices steadied on Monday in Asian markets as investors awaited further cues from U.S. Federal Reserve officials on the direction of interest rates. Despite growing concerns over geopolitical tensions and the U.S. economy, gold prices muted, remaining close to recent highs as the potential for U.S. rate cuts persists.
Meanwhile, copper prices weakened following signals of lackluster fiscal stimulus from China, the largest copper importer. China’s finance ministry announced several economic support measures, but the lack of detail on the scope and timing of these initiatives left markets underwhelmed.
U.S. Interest Rates and Geopolitical Tensions Support Gold
Despite gold remaining near its recent peaks, its momentum has been capped by bets on a slower pace of interest rate cuts by the U.S. Federal Reserve. The focus this week shifts to key speeches from Federal Reserve officials, including Neel Kashkari and Christopher Waller. The potential for lower interest rates still bodes well for gold in the long run, as reduced rates lower the opportunity cost of holding non-yielding assets like gold.
Additionally, persistent concerns over the Middle East conflict, particularly the potential for an escalation, continued to bolster safe-haven demand for gold. If tensions rise, especially if Israel targets Iran’s oil infrastructure, gold prices muted could find renewed upward pressure.
Copper Weakens on China Stimulus
Copper prices fell as markets were disappointed by China’s fiscal stimulus signals. The country’s announcement lacked sufficient detail, particularly in terms of the scale and timing of the measures aimed at boosting economic growth. China’s September inflation data also underwhelmed, showing weakening consumer demand and a shrinking producer price index for the 23rd consecutive month, which raised concerns about the health of the world’s second-largest economy.
As a result, benchmark copper futures on the London Metal Exchange dropped by 0.6%, while December futures declined by 0.8%. Gold prices muted while copper dipped, showing diverging trends between precious and industrial metals in response to global economic cues.
Outlook for Gold and Copper
Looking ahead, analysts anticipate that gold prices muted will continue as long as there is uncertainty around U.S. monetary policy and geopolitical risks. Copper, on the other hand, remains vulnerable to further weakness if China’s economic recovery continues to lag, as industrial metals are heavily reliant on strong demand from the country.
While gold prices muted, investors will closely watch the outcomes of U.S. rate decisions and China’s ongoing economic developments to determine the future direction of these key commodities.
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