By Ambar Warrick
Investing.com– Gold prices hovered above annual lows on Tuesday after tumbling sharply on hawkish signals from the Federal Reserve, while prices rose on hopes that Chinese demand will persevere despite recent economic headwinds.
rose 0.1% to $1,669.76 an ounce, while gained 0.1% to $1,676.75 an ounce by 20:20 ET (00:20 GMT). Both instruments slumped nearly 2% on Monday, their worst drop in over two weeks.
Federal Reserve Vice Chair Lael Brainard on Monday emphasized on the need for restrictive monetary policy, and said that the economic damage of recent rate hikes was yet to be felt.
She added that the bank will only ease off large rate hikes once there is “confidence that inflation comes down,” giving no signals that the central bank intends to soften its hawkish stance.
Her comments boosted the and caused a steep selloff across most asset classes. They also herald more pressure on gold, as rising interest rates pushed up the opportunity cost of holding the yellow metal this year.
The greenback was also supported by safe haven demand as the Russia-Ukraine conflict worsened. Gold, on the other hand, has seen scant safe haven buying this year, apart from the early days of the conflict.
Bullion prices have fallen sharply from annual highs as rising interest rates decimated metal demand. Apart from the Fed, major central banks in Europe and Asia have also embarked on a hiking cycle to combat runaway inflation.
This is expected to weigh on the near-term outlook for gold and other precious metals.
Among industrial metals, copper bucked the trend, rallying 1.5% on Monday as major buyer China re-emerged from a week-long holiday.
were flat around $3.4410 a pound on Tuesday after logging a strong start to the week.
Chinese copper demand has remained steady this year despite slowing economic growth, as local consumers used recent declines in copper prices to build their stockpiles.
Copper has fallen sharply this year on fears that slowing economic growth across the world will weigh on demand. But so far, demand in the world’s largest copper importer, China, has shown few signs of slowing.
Chinese due later this week is expected to shine more light on the country’s copper imports.
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