Gold steadies amid Fed pause bets, weak China PMIs dent copper

Gold prices steadied near three-week highs on Thursday as weak economic readings from the U.S. fueled more bets that the Federal Reserve had little headroom to keep raising interest rates.

The yellow metal saw strong gains this week as weak U.S. GDP and employment readings pulled the dollar and Treasury yields lower. Gold also saw increased safe haven demand amid growing fears of a Chinese economic slowdown, as weak data readings from the Asian giant continued to pour in.

Soft purchasing managers’ index (PMI) readings from China weighed on copper prices, given that the country is the world’s largest copper importer.

Spot gold rose 0.2% to $1,945.49 an ounce, while gold futures expiring in December steadied at $1,972.25 an ounce by 00:28 ET (04:28 GMT). Both instruments were up about 1.6% each this week.

U.S. economic data disappoints, more readings on tap
The dollar slid nearly 1% this week, while Treasury yields came further off recent peaks as weak economic data fueled bets of a less hawkish Federal Reserve.

Focus is now squarely on personal consumption expenditures data, the Fed’s preferred inflation gauge, due later in the day, for more cues on monetary policy.

Nonfarm payrolls data for August is due on Friday, and is expected to show more cooling in the jobs market- a scenario that gives the Fed less impetus to keep raising interest rates.

But historical trends showed that gold has usually shown few positive reactions to nonfarm payrolls, particularly this year as the figure consistently surprised to the upside.

Still, even with the U.S. economy cooling, the outlook for gold remains clouded by the prospect of U.S. rates remaining higher for longer, especially given that inflation has also remained sticky in recent months.

Higher rates push up the opportunity cost of investing in non-yielding assets such as the yellow metal- a trend that had battered gold through the past year.

Copper dips on weak China PMIs
Among industrial metals, copper prices fell on Thursday tracking weak economic signals from the world’s largest copper importer.

Copper futures fell 0.2% to $3.8310 a pound. But they were still sitting on strong gains this week, taking relief from a weaker U.S. dollar.

Data from China showed the manufacturing sector shrank for a fifth consecutive month in August, while non-manufacturing growth also slowed. The readings pointed to continued economic weakness in the country, even as Beijing continues to roll out more stimulus measures to support the economy.

Focus is now on more stimulus measures from Beijing, with media reports suggesting that the People’s Bank of China plans to further trim mortgage and yuan deposit rates to boost liquidity.

Gold steadies amid Fed pause bets, weak China PMIs dent copper