The precious metal market experienced a slight dip on Thursday as traders assessed hawkish signals from the Federal Reserve on monetary policy. Meanwhile, copper prices continued to decline, reflecting growing uncertainty over the possibility of a global recession.
Fed Signals Higher Interest Rates
This week, several Federal Reserve officials spoke on monetary policy, with all of them raising the prospect of higher interest rates. Fed Chair Jerome Powell acknowledged recent progress against inflation, but warned that a strong jobs market and persistent inflation could prompt more rate hikes.
This sentiment was echoed by Fed Governor Christopher Waller and New York Fed President John Williams, who both said that the market expectation of two more rate hikes was a “reasonable view.”
The possibility of higher U.S. interest rates is negative for non-yielding assets such as gold, as it increases the opportunity cost of holding such assets.
Gold Prices Slip
In response to the Fed’s hawkish signals, spot gold fell by 0.1% to $1,874.13 an ounce, while gold futures declined by 0.3% to $1,886.05 an ounce. Although bullion prices were trading higher for the week so far, they were also recovering from steep losses from the previous week, after data showed unexpected resilience in the U.S. jobs market.
The strong U.S. jobs market gives the Fed the necessary room to keep raising interest rates, which is negative for gold and broader metal markets.
Inflation Data in Focus
The markets are now focused on the upcoming U.S. Consumer Price Index (CPI) inflation data for January, which is due next week. Despite the expectation of a further easing in inflation, price pressures are still expected to remain relatively high.
Other Precious Metals Decline
In addition to gold, other precious metals also declined. Platinum futures dropped by 0.3%, while silver futures shrank by 0.6%.
Copper Prices Edge Lower
In the industrial metal market, copper prices inched lower on Thursday, continuing the steep declines seen in the previous session. High-grade copper futures fell by 0.1% to $4.0435 a pound, after dropping by 0.9% in the previous session.
Despite expectations of an increase in demand in major copper importer China this year, traders have started selling the red metal due to concerns over a potential recession in the rest of the world. The markets fear that rising interest rates will weigh on economic activity in the coming months, with recent data already indicating a slowdown in global manufacturing activity.
Overall, the precious metal and industrial metal markets remain cautious as traders weigh the impact of monetary policy and economic activity on metal prices.
In conclusion, the precious metal and industrial metal markets experienced mixed movements on Thursday, with non-yielding assets like gold being impacted by the hawkish signals from the Federal Reserve on monetary policy. The possibility of higher interest rates in the US weighed on gold prices, which slipped by 0.1%. Meanwhile, other precious metals like platinum and silver also declined. In the industrial metal market, copper prices edged lower, reflecting growing uncertainty over the possibility of a global recession. The markets remain cautious as traders assess the impact of monetary policy and economic activity on metal prices, with the upcoming US Consumer Price Index (CPI) inflation data for January being the focus.