Copper suffers from China-related worries as gold holds steady ahead of Fed minutes

On Wednesday, gold prices stayed at six-month highs, ending a recent rise as traders repurchased dollars in anticipation of additional monetary policy clues from the Federal Reserve’s December meeting minutes. The yellow metal saw a solid start to the year as demand for safe havens other than the dollar surged in response to worries about an impending recession and a likely halt in U.S. interest rate hikes. But on Wednesday, the dollar gained some lost territory thanks to apprehension about the anticipated Fed minutes.

Given that multiple inflation data suggested that U.S. price pressures have likely peaked, the markets will be watching to see if the members of the central bank-backed a further softening in interest rate hikes during the December meeting. The probability that the Fed will raise rates in February by just 25 basis points is currently above 90%, according to the markets. Gold futures dropped 0.1% to $1,844.65, while spot gold slipped 0.1% to $1,838.66 per ounce. In their first full trading session of the year, both instruments gained more than 1%.

Given that the probability of a U.S. recession hurts the dollar’s appeal, some people were urged to buy gold when the International Monetary Fund issued a warning about a possible recession in 2023. This warning, along with escalating worries about a sluggish Chinese economic recovery, caused copper prices to fall at the start of the year. After falling by over 2% the previous day, copper futures were unchanged on Wednesday at around $3.7707 per pound.

Given its extensive use in industrial applications, red metal is vulnerable to any changes in the economic outlook. Copper prices fell approximately 12% in 2022 as a result of a slowdown in Chinese manufacturing brought on by COVID-related problems. Even so, it is anticipated that the Federal Reserve would raise interest rates more gradually in the foreseeable future, which should help metal markets, particularly if the dollar continues to decline. The fourth quarter of 2022 witnessed a dramatic decline in the value of the dollar, which helped the metal markets make up some lost ground.

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