Safe-haven demand spurs gold prices’ rebound

Figures already surpassed $2,050
Safe-haven demand spurs gold prices’ rebound
Gold is a safe-haven asset

Gold prices in Monday’s Asian trading showed a notable increase. Spot gold rose 0.2 percent, reaching $2,053.88 per ounce, while gold futures for February climbed by 0.3 percent to $2,057.85 per ounce. These figures are as of 05:27 GMT. 

This upward trend reflects a recovery of most losses since the beginning of the year, primarily driven by persistent geopolitical tensions in the Middle East. The tensions have amplified the demand for gold, which investors consider a safe-haven asset. 

Additional factor

Apart from the geopolitical conflicts, the ongoing speculation about early interest rate cuts by the U.S. Federal Reserve(Fed) further boosts the gold price movement.

The mixed signals from recent U.S. inflation data have led investors to maintain their expectations for a possible interest rate decrease by the Fed, potentially as early as March 2024. This has resulted in a reduction in the value of the U.S. dollar and an increased interest in assets sensitive to interest rate changes.

Moving forward, traders are holding onto their expectations of a 25 basis point rate cut by the Fed in March, as indicated by the CME Fedwatch tool. It shows a 70 percent probability of a March cut, up from 64 percent last week.

The mixed nature of the recent U.S. inflation data, with a slightly higher-than-anticipated rise in the consumer price index and a larger-than-expected drop in the producer price index, has also influenced these expectations.

Volatile gold prices

The market focuses now on upcoming speeches from Federal Reserve officials expected this week, which should provide further clues about the bank’s future direction. However, several Fed officials have tempered expectations for early rate cuts.

The uncertainty surrounding U.S. interest rate trajectories suggests that gold prices remain volatile in the short term. Nevertheless, any decrease in lending rates this year could benefit the value of the yellow metal.

Read: Top gold-producing countries in the world

Meanwhile, in other metal markets, copper prices rebounded on Monday after a weak start to the new year, increasing by 0.8 percent to $3.7648 a pound.

This rise is limited by factors in China, the leading importer of copper, where the central bank decided to keep its lending rates the same. This decision suggests limited potential for further economic stimulus in China, which has yet to boost growth significantly. Moreover, China’s recent trade data revealed a drop in copper imports in December due to high stockpiles and more local production. 

According to the General Administration of Customs, China’s copper imports decreased by 16.6 percent from the previous month, totaling 459,337.6 tons.

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