As traders prepared for a slower pace of U.S. interest rate
decreases after stronger-than-expected nonfarm payrolls data that bolstered the
dollar, gold prices declined in Asian trade on Monday.
Data indicating that China's copper imports reached a
13-month high in December provided little support for copper prices among
industrial metals. Anticipation of additional U.S. trade tariffs against China
lowered sentiment toward the nation.
There was still considerable demand for gold as a safe haven
due to uncertainty around the economic future under incoming President Donald
Trump and a prolonged sell-off in more general risk-driven assets, especially
stocks. This reduced the yellow metal's overall losses.
While gold futures expiring in February remained stable at $2,714.41 an ounce
by 23:49 ET, spot gold dropped 0.1% to $2,686.32 an ounce.
Gold pressured by increased rate jitters; inflation data
awaited
The likelihood that U.S. rates would stay higher for longer
was the key factor driving gold prices as traders further reduced their
expectations on rate reduction this year in response to Friday's payroll news.
More clues about the Fed's rate forecast will be provided by
the impending U.S. inflation data, which is scheduled for release on Wednesday.
The central bank indicated that the labor market's strength and sticky
inflation would provide it with further motivation to maintain high interest
rates.
In a recent note, economists at Goldman Sachs stated that
they had previously predicted three rate cuts from the Fed this year, but now
only expect two. This easing cycle is also anticipated to see a higher central
bank terminal rate.
Higher rates pressure metal markets by increasing the
opportunity cost of investing in non-yielding assets. Among other precious
metals, platinum futures fell slightly to $991.45 an ounce,
while silver futures fell 0.4% to $31.205 an ounce on Monday.
Copper prices flat as markets weigh China outlook
March copper futures increased 0.1% to $4.2960 a pound,
while benchmark copper futures on the London Metal Exchange increased 0.3% to
$9,111.00 an ounce.
As dismal Chinese economic data fueled fresh predictions
that Beijing will provide extra more stimulus to support development, the red
metal was sitting on solid gains from the previous week.
According to trade figures released on Monday, demand for
copper in the world's largest importer remained strong in December, as China's
imports reached a 13-month high of 559,000 metric tons.
Given Trump's high import tariffs, copper bulls are placing bets that Beijing
would provide even more stimulus in the upcoming months.
Trump has promised to impose strict trade restrictions when
he takes office on January 20.
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