Gold prices increase with Fed meet, government shutdown in focus
Gold prices increased on Monday as the market anticipated that the Federal Reserve would maintain interest rates this week. Simultaneously, concerns about a potential U.S. government shutdown led to increased demand for safe-haven assets.
Despite strong inflation and economic data in recent sessions, the market remained unconvinced that a U.S. interest rate hike was imminent. However, the dollar's surge to a six-month high limited gold's gains.
Gold prices are also expected to benefit from safe-haven demand due to worries about a potential U.S. government shutdown. Republican lawmakers are currently in disagreement over defense spending and broader fiscal cuts, with about two weeks remaining to pass a new spending bill and avert a shutdown.
Historically, gold has seen limited gains during past government shutdowns. For example, during the 2018-2019 shutdown, which was the longest in history, gold prices only increased by $20 over 35 days.
U.S. gold futures for December settlement rose by $7.02, or 0.4%, to reach $1,953.40 per ounce on the New York Mercantile Exchange's Comex.
Spot gold, which is based on real-time global trades and closely monitored by some traders, increased by $7.70, or 0.4%, to reach $1,931.51 per ounce.
Both gold futures and spot gold saw a 0.3% gain for the week.
The Federal Reserve is widely expected to keep interest rates unchanged at the end of its two-day meeting on Wednesday. However, market participants are cautious about the central bank's outlook, given recent inflation increases and the resilience of the U.S. economy, which may provide room for further interest rate hikes.
Even if the Fed decides to raise rates, it is expected to maintain rates at their highest levels in over 20 years until at least mid-2024. This has weighed on gold prices over the past year and is likely to limit significant gains in the yellow metal.
Rising interest rates increase the opportunity cost of investing in non-yielding assets, which is unfavorable for metal markets.
Apart from the Fed, central bank decisions in China, the UK, and Japan are also scheduled for this week, with only the Bank of England expected to raise interest rates.
In the industrial metals sector, copper prices showed little movement on Monday amid concerns about China, particularly its property market, a major importer of copper.
U.S. copper futures for December delivery settled down 2.2 cents, or 0.6%, at $3.7790 per pound, following a 2% increase last week.
Although recent economic indicators suggested some recovery in China, the country's property market faces challenges, with concerns about bond payments for developer Country Garden Holdings and the detention of China Evergrande Group's wealth management unit employees.
The People's Bank of China is expected to maintain its loan prime rates at record lows this Wednesday as it seeks to support economic growth. However, the outlook for China's property market, a key driver of copper demand, remains uncertain.
Despite strong inflation and economic data in recent sessions, the market remained unconvinced that a U.S. interest rate hike was imminent. However, the dollar's surge to a six-month high limited gold's gains.
Gold prices are also expected to benefit from safe-haven demand due to worries about a potential U.S. government shutdown. Republican lawmakers are currently in disagreement over defense spending and broader fiscal cuts, with about two weeks remaining to pass a new spending bill and avert a shutdown.
Historically, gold has seen limited gains during past government shutdowns. For example, during the 2018-2019 shutdown, which was the longest in history, gold prices only increased by $20 over 35 days.
U.S. gold futures for December settlement rose by $7.02, or 0.4%, to reach $1,953.40 per ounce on the New York Mercantile Exchange's Comex.
Spot gold, which is based on real-time global trades and closely monitored by some traders, increased by $7.70, or 0.4%, to reach $1,931.51 per ounce.
Both gold futures and spot gold saw a 0.3% gain for the week.
The Federal Reserve is widely expected to keep interest rates unchanged at the end of its two-day meeting on Wednesday. However, market participants are cautious about the central bank's outlook, given recent inflation increases and the resilience of the U.S. economy, which may provide room for further interest rate hikes.
Even if the Fed decides to raise rates, it is expected to maintain rates at their highest levels in over 20 years until at least mid-2024. This has weighed on gold prices over the past year and is likely to limit significant gains in the yellow metal.
Rising interest rates increase the opportunity cost of investing in non-yielding assets, which is unfavorable for metal markets.
Apart from the Fed, central bank decisions in China, the UK, and Japan are also scheduled for this week, with only the Bank of England expected to raise interest rates.
In the industrial metals sector, copper prices showed little movement on Monday amid concerns about China, particularly its property market, a major importer of copper.
U.S. copper futures for December delivery settled down 2.2 cents, or 0.6%, at $3.7790 per pound, following a 2% increase last week.
Although recent economic indicators suggested some recovery in China, the country's property market faces challenges, with concerns about bond payments for developer Country Garden Holdings and the detention of China Evergrande Group's wealth management unit employees.
The People's Bank of China is expected to maintain its loan prime rates at record lows this Wednesday as it seeks to support economic growth. However, the outlook for China's property market, a key driver of copper demand, remains uncertain.
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