By Ambar Warrick
Investing.com– Gold prices hovered near key support levels on Wednesday, while copper prices fell further as concerns over China and weak economic data soured the demand outlook for the industrial metal.
A weakening metal markets saw little support, as fears over a slowdown of most major economies slowed appetite. Traders were also worried about the Federal Reserve meeting next month.
By 19:37 ET (23.37 GMT), the price of an ounce dropped 0.1% to $1.651.76, while it fell 0.1% at $1,655.85 per ounce. Both instruments rose slightly on Tuesday but were pinned at $1,650 – a closely monitored support level.
Bullion prices fell from their annual highs this year, and are now trading at a two-year low. This is due to rising interest rates increasing the opportunity cost of holding the yellow gold. With the U.S. dollar accelerating past gold, gold has also lost its safe-haven status.
The near-term outlook for gold is subdued. Markets are pricing in a nearly 100% chance that the Fed will raise its interest rate by 75 basis points in November. However, the Fed may have to ease its hawkish stance if there is a severe economic downturn. This week’s pressure on gold was somewhat lessened.
In recent sessions, expectations that the central banking will enact an easing of the December rate hike grew after a Wall Street Journal report suggested the Fed was considering such an action.
Copper prices fell for the third straight session. The biggest selling pressure was from China.
After losing more that 2% in the two previous sessions, the price of a pound fell 0.2% and dropped to $3.3972.
President Xi Jinping’s approval for a third term drove up concerns over more economically-disruptive policies, especially after the Chinese President reiterated the country’s
Commitment to its strict zero-COVID policy
While China’s copper imports remained steady through September, middling weighed on sentiment towards the country.
Weak manufacturing indicators from the world’s three largest economies, released this week, also painted a dim picture of global industrial activity, boding poorly for copper demand.
The physical copper market is still tight, despite slowing production from Chile and U.S. restrictions on Russian exports.
Focus is now on upcoming U.S. data due this week to gauge the impact of rising interest rates on the world’s largest economy.