Gold prices experienced further declines on Tuesday, following the previous session’s downward trend, as investors awaited crucial cues regarding the US economy and anticipated speeches from Federal Reserve officials.
Initially, the precious metal witnessed a significant rise amidst the Israel-Hamas conflict, which prompted investors to seek refuge in safe havens. However, it changed course this week after a higher-than-expected US inflation report raised apprehensions about the possibility of increased interest rates.
Additionally, the lack of an immediate escalation in the war dampened the demand for safe haven assets in the short term, while the US dollar stabilized close to 11-month highs.
By 00:31 ET (04:31 GMT), spot gold had declined by 0.3% to reach $1,915.32 per ounce, while December’s gold futures dropped by 0.3% to $1,927.85 per ounce. Both instruments experienced similar declines on Monday.
The focus has now shifted towards forthcoming US retail sales data and industrial production figures, scheduled for release later on Tuesday. Observing any signs of resilience, especially in retail spending, could indicate an increased inflation outlook.
Last week, US consumer inflation figures exceeded expectations for September, intensifying concerns that the Federal Reserve’s stance would remain hawkish for an extended period to combat persistent inflation.
Several Fed officials are also scheduled to deliver speeches throughout the week, with particular attention on Fed Chair Jerome Powell’s remarks on Thursday. Given the impact of the robust inflation readings, Powell’s comments will be closely monitored, especially after the previous meeting where he suggested prolonged periods of higher interest rates.
Gold tends to suffer under higher interest rates due to the increased opportunity cost of investing in the precious metal. This trend has negatively affected gold throughout the past year and is expected to curtail significant gains until the Federal Reserve initiates interest rate cuts.
In the realm of industrial metals, copper prices experienced a decline on Tuesday, reversing previous gains as investors prepared for important economic data releases from China.
Copper futures dropped by 0.5% to reach $3.5648 per pound.
Anticipation is rising for China’s third-quarter gross domestic product (GDP) data, expected to be published on Wednesday, which is anticipated to reveal a further deterioration in growth for the largest copper-importing country globally.
Likewise, industrial production figures for September, also set to be released on Wednesday, are expected to display continued weakness in the sector, accounting for a significant portion of Chinese copper demand.
Nevertheless, copper bulls drew some encouragement from the quarterly production results of major miner Rio Tinto Ltd (ASX:RIO). The company reported slightly stronger iron ore and copper shipments, reflecting steady demand from China.