Gold prices dropped below key levels on Tuesday due to diminishing concerns over the Israel-Hamas war, reducing the demand for safe-haven assets. Despite the ongoing conflict, traders began to factor in a lower risk premium as no other Arab powers had joined the war. This caused gold to give up some of the gains it had made at the beginning of October. Additionally, the anticipation of a Federal Reserve meeting led traders to favor the dollar, further weighing down the price of gold.
The upcoming Federal Reserve meeting took center stage this week, diverting market attention from gold. While the central bank is expected to maintain its benchmark rate, it is anticipated to reiterate its stance on higher rates in light of persistent inflation and a resilient economy in the U.S. This is likely to limit any significant increase in the price of gold, as higher interest rates increase the cost of holding bullion. Nevertheless, gold experienced a rise of 6% to 8% in October due to safe-haven demand during the Israel-Hamas war, making it the best performing month since March. Overall, gold prices have increased by nearly 10% in 2023.
In the industrial metals market, copper prices declined following disappointing economic data from China, the largest importer of the metal. China’s purchasing managers index unexpectedly contracted in October, while the growth of its manufacturing sector was slower than anticipated. These figures indicated that stimulus efforts from Beijing were only providing limited support to the Chinese economy, with other factors such as a real estate crisis and weak trade also hindering growth. As a result, concerns emerged about the future demand for copper in the coming months.
