Gold prices in Asian trading fell due to a combination of strong labor market data and hawkish signals from the Federal Reserve, leading to decreased expectations for early interest rate cuts. The yellow metal dropped from highs above $2,050 an ounce in response, pressured by the likelihood of higher interest rates in the near future. The dollar rose to a near two-month high, while Treasury yields also advanced in Asian trade. Despite support from increased safe haven demand amid conflict in the Middle East, the prospect of higher-for-longer interest rates poses a challenge for gold, as it pushes up the opportunity cost of buying bullion.
Additionally, Copper prices rose slightly on Monday on concerns of potential supply disruptions in Chile following wildfires in the country. Despite these concerns, the worst of the forest fires was located far away from the country’s biggest copper mines, casting doubts on the extent of supply disruption from the fires. This, coupled with persistent concerns over slowing demand in top importer China, has hampered further gains in copper prices.
Given the situation, the yellow metal has largely retained the $2,000 an ounce level, but its spot prices are still within sight of record highs reached in late 2023. As for copper, any potential disruptions in supply from Chile, the world’s largest producer of the metal, could impact global copper markets. However, the situation remains uncertain due to the wildfires being located away from major copper mines in the country.