Gold prices weaken, spot slips below $1,900 as rate hike fears persist

Gold prices fell below key levels on Wednesday, extending a recent slump as persistent fears of rising interest rates, following hawkish signals from the Federal Reserve, saw investors largely favor the dollar.

The greenback scaled 10-month highs this week, having largely overtaken gold as a preferred safe haven this year as interest rates rose. With the Fed now signaling one more rate hike in 2023 and fewer rate cuts next year, this trend is set to continue.

Surging Treasury yields also pressured gold’s appeal, with the 10-year benchmark hitting a 16-year high this week.

Spot gold- which represents real-time trade in physical bullion, sank 0.2% to $1,897.49 an ounce, falling below the $1,900 level for the first time in a month.

Gold futures expiring in December fell 0.2% to $1,914.95 an ounce, and were also trading at one-month lows by 00:31 ET (04:31 GMT). Both instruments extended losses into a third straight session.

Rising interest rates push up the opportunity cost of investing in gold and other non-yielding assets. This trade had battered the yellow metal through the past year.

Any scope for a recovery in gold is also clouded by the prospect of U.S. rates remaining higher for longer.

Gold sees little safe haven demand even as govt shutdown looms
The yellow metal saw few safe haven flows even as markets grew more concerned over a U.S. government shutdown. Congress has until the end of September to pass a spending bill, although policymakers showed little signs of reaching consensus on a broader spending bill.

Analysts warned that a shutdown in 2023 could have greater ramifications for the U.S. economy, especially as it grapples with high interest rates and sticky inflation.

But that notion appeared to have driven few inflows into gold, given that past shutdowns had a limited impact on risk-driven assets, particularly stocks.

Copper weakens despite positive Chinese data, property jitters deepen
Among industrial metals, copper prices fell on Wednesday even as data showed that China’s industrial profits rebounded in August after a nearly year-long slump.

Copper futures fell 0.2% to $3.6402 a pound, and were close to a one-month low.

Optimism over the Chinese data was largely offset by worsening fears of a property market crisis.

Media reports said that the chairman of beleaguered developer China Evergrande Group (HK:3333) had been placed under police surveillance, just a few days after it suspended its debt restructuring plan over an investigation into its unit Hengda Real Estate.

Evergrande is the world’s most indebted property developer, and is at the heart of a deepening debt crisis in China, which has dented economic growth over the past three years.

China’s property market is key source of copper demand, with concerns over the sector having battered copper prices through the past year.