Divergent Performance of Metals Following U.S. Interest Rate Cut: Copper Declines, Nickel Rises Slightly
Metals prices showed mixed reactions after the U.S. Federal Reserve’s interest rate cut, with copper declining, nickel rising slightly, and zinc remaining stable, as investors remained cautious about the impact of this decision on the U.S. economy and the metals market.
Metals prices fluctuated after the Federal Reserve lowered interest rates by half a percentage point.
While copper approached its highest level in three weeks, aluminum trimmed its gains, zinc remained flat, and nickel saw a slight uptick.
This market movement reflects investors analyzing the effects of the Fed’s monetary policy
on economic growth and the labor market in the U.S.
Focus on the U.S. Economy and Metals Market
Despite the Federal Reserve’s ongoing efforts to curb inflation,
challenges in the Chinese economy and the performance of the U.S. economy have posed obstacles to a significant rise in metal prices.
Investor confidence has weakened, though some signs of recovery are visible in the Chinese market.
Copper stockpiles in Shanghai Futures Exchange warehouses have returned to normal levels,
and premiums on imported copper have risen to their highest point since the start of the year.
Future Outlook for the Metals Market
A report from Everbright Futures noted that the rate cut strengthens expectations of a soft landing for the U.S. economy,
gradually supporting copper’s performance. However, instability in the stock market continues to affect investor confidence.
Divergent Performance of Metals Following U.S. Interest Rate Cut
Gold Hikes USD Slides, The haven asset was little changed on Tuesday as data showed euro-area industrial production unexpectedly declined in August,
underscoring the risk of a slowdown in the bloc.
Gold prices have been volatile recently as investors weigh the increasing risk of a global recession against the Federal Reserve’s tightening path.
Some market participants believe that a recession is inevitable, while others believe that the Fed will be able to prevent one.
A report on Wednesday may show US retail sales growth cooled last month,
while gold is still down for the year, it’s recovered about $100 from an August low as investors weigh the prospects for further interest-rate increases by the Fed and risks to global economic growth.
The metal is often seen as a hedge against inflation and currency debasement.
“Gold prices are likely to remain under pressure in the near term given concerns about global trade tensions and rising interest rates,”
ANZ Bank Ltd. analysts including Daniel Hynes wrote in a report dated Tuesday, Gold steadied on Tuesday with the focus shifting to whether central banks will follow through with more interest rate hikes amid increasing recessionary risks globally.
Investors have been closely monitoring trade tensions between China and the United States as well as yield curves which inverted earlier this year – typically viewed as a recessionary signal – for clues on where markets are headed next.
While gold is still down for the year, it has recovered $100 from an August low, providing some relief to investors who see it’s a safe haven asset during times of market turmoil.
The Golden Opportunity
The metal is still down about 7% from a peak in early August when Turkey’s currency crisis and fears of contagion roiled global markets.
Haven demand for gold has since cooled as trade tensions between the US and China eased and the Fed signalled it would pause rate hikes.
While bullion may be steadying around $1,200 an ounce in the near term, with a focus on the outlook for rates and risks of recession, prices are likely to remain under pressure as central banks globally move to normalize monetary policy.
Gold prices gained on Tuesday as a lower dollar increased the attraction of bullion to international investors,
despite worries about expected supersized interest rate rises by the United States.
Further advances were capped by the Federal Reserve.
As of 0709 GMT, spot gold was up 0.2% to $1,653.31 per ounce while gold futures in the United States were down 0.3% at $1,658.50 an ounce.
The dollar index sank to a one-and-a-half-week low as the sterling rose
in response to the UK’s sudden U-turn on its tax-cutting mini-budget that had unsettled global markets earlier this week.”
According to Jigar Trivedi, a senior analyst at Mumbai-based Reliance Securities,
gold’s increase on Tuesday is primarily due to the weakening of the US dollar
but “the investment demand and retail demand have been muted, and there is no major trigger that can take prices above $1700 per oz in the near term”.
There are still concerns related overhang of potential interest rate hikes he added.
The debate over whether or not a recession is coming has caused gold prices to fluctuate between gains and losses.
However, some signs suggest that now may be a good time to buy gold.
Is Now the Time to Invest in Gold
One of these signs is the fact that the forecast for a US recession within the next year has hit 100%.
This means that there is an increasing chance of a recession happening shortly.
Another sign is Blinken’s comments about China wanting to seize Taiwan on a ‘much faster timeline.’
This suggests that tensions between China and other countries are likely to increase,
which could lead to more safe-haven buying of gold.
Overall, it seems like now may be a good time to start buying gold.
The risks of investing in other assets are becoming increasingly apparent,
while gold remains relatively stable (despite recent volatility).
So, if you’re looking for somewhere safe to park your money during these uncertain times, Gold may be worth considering
