Gold prices creep higher as dollar falls from 2-mth high

August 22, 2023 02:38 PM AEST | By Investing

Gold prices creep higher as dollar falls from 2-mth high — Image source: Kalkine Media

Treasury yields surge ahead of Jackson Hole

But while gold saw some relief on Tuesday, the outlook for the yellow metal was largely dampened by a spike in U.S. Treasury yields.

10-year yields surged to an over 20-year high this week as markets positioned for potentially higher-for-longer U.S. interest rates.

Focus this week is squarely on an address by Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium this Friday. The Fed Chair is expected to provide more cues on the path of monetary policy, with sticky inflation and a tight labor market potentially inviting a hawkish outlook from the central bank.

Investment banks warned that Powell could flag a new era of higher baseline rates - a scenario that bodes poorly for metal markets.

The prospect of rising U.S. rates battered gold in recent weeks, given that higher rates push up the opportunity cost of investing in non-yielding assets.

Strength in the dollar also weighed, although the greenback fell slightly from a two-month high this week. This offered some relief to gold prices.

Copper edges higher, China stimulus in focus

Among industrial metals, copper prices also advanced slightly on Tuesday, benefiting from weakness in the dollar.

Copper futures rose 0.2% to $3.7263 a pound.

But prices of the red metal were also nursing steep losses over the past three weeks, amid growing impatience with more stimulus measures in China.

The People’s Bank of China largely disappointed markets with its interest rest cut this week, drawing calls from investors for more targeted, fiscal measures to support a slowing economic recovery.

China is the world’s largest copper importer, with an economic slowdown in the country this year having weighed heavily on copper prices and demand.

This article first appeared in Investing.com

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