Gold turns flat before payrolls data, copper cheered by China reopening

© Reuters.

By Ambar Warrick

Investing.com -- Gold prices hovered near seven-month highs on Friday as markets awaited a key reading on U.S. nonfarm payrolls, while copper prices reversed weekly losses amid the relaxing of more anti-COVID measures in major importer China.

U.S. nonfarm payrolls are expected to have eased slightly in December, indicating some cooling in the labor market after a series of sharp rate hikes by the Federal Reserve in 2022. But given that the reading has consistently topped estimates for eight months running, markets fear that any signs of resilience in the jobs market will give the Fed enough headroom for more hawkish moves.

Spot gold rose 0.1% to $1,834.53 an ounce, while gold futures fell 0.1% to $1,839.25 an ounce by 19:50 ET (00:50 GMT). Still, both instruments were set for a 0.5% gain this week - their third straight week in black.

Gold prices were supported by recent signals from the Fed that the central bank will likely raise interest rates at a slower pace in 2023, after a series of sharp hikes in the prior year. Fears of a looming recession in 2023 also saw bullion prices benefit from a resurgence in safe haven demand.

But central bank policymakers indicated that they will likely hold rates higher for longer, with curbing inflation being their main focus. This has brewed much uncertainty over exactly where U.S. rates will peak, given that inflation is still well above the Fed’s target 2% rate.

The Fed also indicated that it will look for some cooling in the job market to ease its hawkish rhetoric. But so far, the U.S. labor market has remained resilient despite headwinds from slowing growth.

Safe haven demand helped gold largely outperform other precious metals for the week. Platinum futures were down 1.3% this week, while silver futures shed nearly 3%.

Among industrial metals, copper prices traded flat after sharply reversing recent losses on Thursday after the Chinese government said it will reopen the border with financial hub Hong Kong on January 8.

The move points to the relaxing of more anti-COVID curbs in China, and ramped up optimism over a broader reopening in the country. Copper futures were flat around $3.8252 a pound and were headed for a third straight week of gains, following an over 2% rally on Thursday.

Still, China is facing an unprecedented spike in COVID-19 cases after the country relaxed curbs in December. Analysts have warned that this trend could delay a broader reopening, and also cause near-term market volatility.