Gold rally cools amid Fed speculation, copper losses deepen

Gold rally cools amid Fed speculation, copper losses deepen

Gold prices edged lower from seven-week highs on Friday amid speculation over whether the Federal Reserve was close to ending its rate hike cycle, while copper sank further on concerns over major importer China.

The yellow metal marked strong gains on Tuesday after data showed U.S. retail sales grew less-than-expected in June, pointing to potentially less sticky consumer inflation. 

But strength in the dollar, which rebounded sharply from 15-month lows, kept bigger gains in gold prices limited. The greenback is expected to see increased bids ahead of a Federal Reserve meeting next week. 

Dovish signals from the European Central Bank and the Bank of England also boosted the appeal of the yellow metal, as did increased safe haven demand in the face of worsening economic growth in China.

Spot gold fell 0.2% to $1,975.88 an ounce, while gold futures fell 0.1% to $1,979.35 an ounce by 00:08 ET (04:08 GMT).

Fed close to hitting peak rates, 25 bps hike due next week

Softer-than-expected retail sales data saw traders pricing in a greater possibility that the Fed will announce a pause in its rate hike cycle next week. 

While the central bank is widely expected to raise rates by 25 basis points, it is also seen running out of headroom for future hikes, amid signs of easing U.S. inflation and economic growth.

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Any potential pause in the Fed’s rate hike cycle bodes well for non-yielding assets such as gold, which were battered by a steep increase in interest rates through the past year.

But gains in gold are also expected to remain somewhat limited, with U.S. interest rates set to remain higher for longer. 

Other precious metals retreated on Wednesday, following strong gains in the prior session. Platinum fell 0.2%, while silver declined 0.1%. 

Copper losses extend amid China concerns, stimulus awaited 

Copper prices fell further on Wednesday, extending losses into a fourth straight session amid growing concerns over major importer China. 

Copper futures fell 0.5% to $3.8135 a pound, after sliding nearly 3% in the past three sessions.

Data released earlier this week showed that China’s economy barely grew in the second quarter, as a post-COVID economic recovery ran out of steam. 

While the world’s largest copper importer is now expected to release more stimulus measures to support growth, analysts questioned just how quickly the economy could rebound.

Government officials vowed to promote domestic spending this week, while local media reports also suggested that the People’s Bank of China was set to cut interest rates in the third quarter.

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