Gold prices experienced an upswing on Monday as market participants speculated that the Federal Reserve would maintain its current interest rates during this week’s meeting. Meanwhile, growing fears of a U.S. government shutdown added to the demand for safe-haven assets.
Despite recent strong inflation and economic activity data, markets remain unconvinced about an imminent U.S. interest rate hike. However, the gains in gold prices were limited due to the U.S. dollar surging to six-month highs in response to the economic data.
Gold prices are also expected to benefit from safe-haven demand as concerns mount over the possibility of a U.S. government shutdown. Top Republican lawmakers are currently in disagreement over defense spending and broader fiscal spending cuts, with about two weeks remaining to pass a new spending bill and avoid a shutdown.
It’s worth noting that historical data shows gold has seen relatively modest gains during past government shutdowns. For instance, during the longest government shutdown in history, which occurred from 2018 to 2019, gold prices increased by just $20 over 35 days.
On the Comex division of the New York Mercantile Exchange, U.S. gold futures set to expire in December rose by $7.02, or 0.4%, closing at $1,953.40 per ounce. Spot gold, measured in real-time global trades and closely tracked by some traders, increased by $7.70, or 0.4%, reaching $1,931.51 an ounce by 15:00 ET (19:00 GMT). Both gold futures and spot gold recorded a 0.3% gain during the previous week.
Federal Reserve Expected to Maintain Rates with a Hawkish Outlook
The Federal Reserve is widely anticipated to keep interest rates unchanged at the conclusion of its two-day meeting this Wednesday. However, market participants remain cautious about the central bank’s outlook, given recent inflation increases and the resilience of the U.S. economy, which could provide more room for further rate hikes.
Despite potential future rate hikes, the Fed is expected to maintain interest rates at levels not seen in over 20 years until at least mid-2024. This has put pressure on gold prices over the past year and is likely to limit significant upward movements in the precious metal. Rising interest rates make non-yielding assets less attractive, presenting a challenging environment for the gold market.
In addition to the Fed meeting, central bank decisions in China, the UK, and Japan are also scheduled for this week, although only the Bank of England is expected to raise interest rates.
Copper Prices Remain Steady Amid Concerns Over China’s Property Market
Copper prices showed little movement on Monday amid renewed concerns about China, the world’s largest copper importer, particularly in relation to its property market.
U.S. copper futures for December delivery settled at $3.7790 per pound, down 2.2 cents or 0.6%, after posting a gain of over 2% in the previous week.
Despite recent economic indicators suggesting a recovery in China’s economy, its property market faces new challenges this week, with more bond payments due for the embattled developer Country Garden Holdings. Additionally, Chinese authorities detained employees of China Evergrande Group’s wealth management unit, raising concerns about increased government scrutiny of the property sector.
The People’s Bank of China is expected to maintain its loan prime rates at record lows this Wednesday as it aims to support economic growth. However, the outlook for China’s property market, a significant driver of copper demand, remains uncertain.