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Gold Prices Hold Steady, Awaiting Powell's Insight After Robust November Performance

1 December 2023 Written by Anna Segal  Finance Industry Expert Anna Segal

Gold prices have shown remarkable stability near a seven-month peak as of Friday, temporarily halting their recent upswing. This pause in momentum is largely due to market anticipation of Federal Reserve Chair Jerome Powell's insights on U.S. interest rates, which are expected later in the day. Contributing to the enduring appeal of gold as a safe-haven asset are the mixed purchasing managers index (PMI) readings from various Asian regions. These readings have fueled concerns about an impending economic downturn, thereby maintaining a high demand for gold.

Speculations November witnessed significant gains for gold, driven by market convictions that the Federal Reserve might halt further interest rate hikes, potentially transitioning to rate cuts in 2024. However, the precise timing of these anticipated cuts remains a pivotal uncertainty for financial markets.

Spot gold experienced a modest increase of 0.3% to $2,041.35 per ounce, while December gold futures edged up 0.2% to $2,041.30 per ounce by early morning. Both gold instruments have recorded substantial gains in November, with spot prices approaching near-record highs.

Jerome Powell's Anticipated Speech

Powell is scheduled to speak at two events on Friday. Despite his generally firm stance on maintaining higher interest rates for an extended period, the market is eagerly awaiting any potential shifts in his position, especially in light of recent dovish signals from other Federal Reserve officials. These officials have noted the significant reduction in U.S. inflation over recent months, hinting at the possibility of earlier-than-expected rate cuts if this trend continues.

However, U.S. inflation, while slowing, still exceeds the Fed's 2% annual target. This was evident in the recently released PCE price index data, which partly fueled the dollar's rebound. Powell's comments, preceding a two-week communication blackout ahead of the mid-December Fed meeting, are expected to provide crucial guidance. The Fed is broadly anticipated to maintain the current rate stance at this upcoming meeting.

In the realm of industrial metals, copper prices have shown stability following their strong performance in November. This steadiness comes amid some positive economic indicators from China and expectations of a tighter supply. Copper futures for March were unchanged at $3.8515 a pound, after a notable 5.5% rally in November. A private survey indicated growth in China's manufacturing sector for November, countering a government survey earlier in the week that showed the sector in contraction. These conflicting indicators present a complex picture of China, the world's largest copper importer, which has been grappling with a slow economic recovery this year.

Supply Dynamics Impacting Copper

The copper market is also facing potential supply constraints. Mine closures in Peru and Panama are expected to tighten copper markets in the coming months, adding another layer of complexity to the metal's global trade dynamics.

As markets globally face a mix of economic signals, the focus is intensifying on Powell's upcoming speeches for potential shifts in the Federal Reserve's policy outlook. This, combined with the contrasting economic data and supply concerns in the copper market, paints a complex picture for commodities as the year draws to a close.

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