Gold saw little action on Thursday, but held tightly to recent gains as investors looked keenly to clues from the Fed on further monetary tightening. Similarly, copper prices continue to trade flat despite China’s latest stimulus package.
While spot gold remained largely unchanged and traded for $1,724 an ounce, gold futures ticked higher by 0.2% to trade for $1,765 an ounce.
Gold has performed superbly in the last couple of days, boosted by a retreating dollar index from a two-decade high. Nevertheless, traders are hesitant to buy gold as they wait on comments from Fed Chair Jerome Powell, who is billed to speak at the Jackson Symposium on Friday. Meanwhile, the dollar has continued to trade flat after edging low from a two-decade high.
All eyes on the upcoming Fed meeting
While investors await comments from the Fed on its monetary tightening policy, analysts expect the Fed Chair to reiterate a hawkish stance. Should that be the case, there is every likelihood that the Fed will not negotiate its stance on aggressive hikes as it works on managing inflation and rising food prices.
Nearly 65% of market participants predict the Fed will increase rates by 75 basis points in September as it works to push inflation down from a 40-year peak.
Similarly, hawkish statements from several Fed officials have reinforced analysts’ expectations of an aggressive monetary tightening policy. It should be recalled that the Fed has increased rates four times this year till now.
Previously, Fed’s continued aggressive interest rate hikes had impacted gold prices, forcing it to lose nearly all the gains made during the start of the Russian-Ukraine war. More so, the higher yields offered by the greenback made it a more appealing option than the yellow metal.
Other precious metals also saw little action on Thursday. Even though copper edged slightly higher, it failed to capitalize on a fresh round of Chinese stimulus. In terms of performance, copper futures rallied by 0.1% to trade at $3.6433 a pound.
On Wednesday, the Chinese government announced a new round of stimulus packages worth nearly 1% of its GDP. The government is taking this action to boost economic activities after coming under pressure from covid 19 lockdowns.