Gold prices fell on Thursday after failing to sustain recent gains, while copper extended its losses today after an interest rate hike and an upbeat message from the Federal Reserve that boosted the dollar and weighed heavily on metals markets.
Bullion prices initially showed some resilience after the Fed’s decision, rebounding from two-year lows as investors saw the metal oversold. But it has since succumbed to most of those gains and has traded in a flat to low range.
gold now
Spot gold is now down 1% to $1,657.56 an ounce, while gold futures are down $1,664.45 an ounce, losing nearly 0.64% of its value. Both instruments rose about 0.5% on Wednesday after the Fed’s decision.
Urgent: The Fed hits bleak expectations .. the dollar index penetrates strongly .. all markets are affected
Federal pressure
Metals markets also shared a similar degree of volatility as most other asset classes after the Federal Reserve raised interest rates by 75 basis points, as expected. But the central bank took a hawkish-than-expected tone about the future course of interest rates, bolstering expectations that US interest rates will end the year well above 4%.
Fed Chairman Jerome Powell has stated that the bank needs to take tougher measures to combat hyperinflation, and is prepared to put some pressure on the economy and labor market as a result.
Powell’s comments also sent the dollar up 1% to a 20-year high, putting pressure on most metals prices. Silver and platinum futures lost 0.1% and 0.4%, respectively.
Gold prices retreated from the highs recorded during the early days of the Russia-Ukrainian conflict, as higher US interest rates boosted the dollar and pulled capital away from the yellow metal. It has also lost its status as a reliable safe haven, having plunged in value despite growing fears of an upcoming recession.
other metals
Among industrial metals, copper futures fell 0.3 percent to $3.4260 a pound, after falling 2 percent on Wednesday. The Fed’s hawkish stance is likely to further pressure global economic growth, dampening demand for the red metal.
Sentiment toward copper also subsided on Wednesday after the CEO of major miner Rio Tinto (ASX:RIO) warned that prices for the red metal were set for short-term weakness due to rising inflation and supply chain disruptions. The red metal also has to contend with weak economic growth in China, the world’s largest copper importer.
However, copper prices received some recent support from a strike in Escondida in Chile, the world’s largest copper mine. This move is expected to eventually tighten the supply of the red metal.
