Gold prices firm as dollar rally cools, copper buoyed by China hopes

© Reuters.

By Ambar Warrick

Investing.com -- Gold prices hovered at an over one-week high on Thursday as weakness in the dollar benefited the yellow metal, while copper steadied after a strong rally this week on increasing optimism over a Chinese economic recovery.

Bullion prices rose for three consecutive sessions from their weakest level this year, as a February rally in the dollar appeared to have run out of steam. The greenback fell sharply against a basket of currencies on Wednesday, also hit by some profit taking after rallying nearly 3% in the past month.

Spot gold steadied around $1,837.38 an ounce, while gold futures were flat at $1,843.75 an ounce by 19:22 ET (00:22 GMT). Both instruments rose about 0.6% and 0.4%, respectively, on Wednesday.

Copper prices steadied on Thursday after stellar gains in the prior session, as data showed that Chinese business activity surged to an over 10-year high in February.

Copper futures rose 0.1% to $4.1723 a pound after rallying 2.3% in the prior session. The red metal was also up over 5.5% this week.

The positive Chinese data indicates a strong economic recovery after the country relaxed most anti-COVID measures earlier this year, and bodes well for commodity demand in the world’s largest copper importer.

But copper bulls still have to contend with rising interest rates and slowing industrial activity in the rest of the globe.

U.S. manufacturing activity data read softer than expected in February, data showed on Wednesday. But an unexpected rise in manufacturing prices indicated that inflation may be more stubborn than expected in the world’s largest economy.

Stronger-than-expected German inflation readings also pushed up concerns that the European Central Bank will keep raising interest rates at a sharp clip. The prospect of rising interest rates bodes poorly for metal markets, as it drives up the opportunity cost of holding non-yielding assets.

Metal prices had slumped in 2022 on this trade, and may face more weakness in the coming months. While the yellow metal stands to eventually benefit from a reversal in U.S. monetary policy, such a reversal seems unlikely in the near-term, given that inflation is still running red hot in the country.

Focus today is on euro zone inflation data, as well as a reading on U.S. nonfarm productivity through the fourth quarter.

Other precious metals fell slightly after strong gains in the prior session. Platinum futures fell 0.3% to $957.35 an ounce, while silver futures fell 0.1% to $21.073 an ounce.