Gold prices reach a seven-month high as hawkish Fed concerns ebb 

On Monday, gold prices increased and maintained a seven-month high as signs of a slowing jobs market raised hopes for a lower U.S. inflation reading this week and a future shift away from the Federal Reserve’s aggressive rhetoric. After Labor Department data revealed that U.S. nonfarm payrolls expanded at their weakest rate in a year in December, prices for the yellow metal spiked on Friday. Wage growth also slowed, and readings for the preceding two months were revised lower.

Gold futures increased 0.2% to $1,873.15 an ounce, while spot gold increased 0.1% to $1,868.61 an ounce. Following an almost 2% increase on Friday, both instruments were trading at their highest level since early June. Following a significant reversal of last week’s gains on the payrolls data, the dollar weakened further on Monday, and 10-year Treasury yields also decreased. A series of swift interest rate increases by the Fed in 2022 is having the desired impact, as CPI inflation is anticipated to have dropped to a one-year low in December.

Due to the increased opportunity cost of keeping non-yielding assets, these rate increases hammered gold prices last year. However, during the past month, demand for the yellow metal has increased as investors once again turned to safe-haven assets due to concerns about a probable 2023 recession. With most traders pricing in a 25 basis point increase just in February, the Fed is now anticipated to further decrease the pace of interest rate hikes. Yet the central bank has issued a warning that it might maintain higher rates for longer.

In terms of industrial metals, copper prices experienced a small decline on Monday but remained close to a seven-month high after a dramatic spike in the red metal was sparked by optimism regarding the reopening of China’s external borders. After a 2.6% increase the previous week, copper futures declined 0.4% to $3.9588 per pound. Prices of the red metal increased as China significantly relaxed anti-COVID policies this month, a move that markets think will hasten the world’s top copper importer’s economic recovery.

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