Gold and Copper Pause Rally as Dollar Firms Amid Stocks Slump
Gold and copper edged lower as poor risk sentiment driven by weak corporate earnings pushed the dollar up.
European shares and U.S. equity futures declined on Thursday amid the souring mood in the stock market. The greenback snapped three days of declines as investors sought a haven, putting pressure on gold and metals priced in the currency.
U.S. businesses’ payrolls fell last month by the most since the early days of the pandemic, due to the spread of the omicron coronavirus variant, according to ADP Research Institute data. That release came ahead of Friday’s employment report from the Labor Department which will be eyed by traders to gauge the pace of wage inflation.
“The bar is very high for a data miss to derail the Fed’s hiking plans, given its commitment to inflation,” Nicky Shiels, head of metals strategy at MKS PAMP SA, wrote in a note. “Gold needs both softer jobs and weaker inflation prints in order for global central banks to step off the pedal.”
Bullion is holding near $1,800 an ounce as traders price in the prospects of the Federal Reserve raising interest rates in March. Volatility in equities and geopolitical tensions are providing support to the haven asset, attracting inflows back to exchange-traded funds.
On Thursday, the Bank of England lifted its key interest rate as part of measures to contain inflation, with policy makers coming close to an even bigger hike. The European Central Bank left its rates unchanged, in line with expectations.
Spot gold edged down 0.3% to $1,800.82 an ounce as of 1:03 p.m. in London, after climbing 0.9% in the previous three days. The Bloomberg Dollar Spot Index rose 0.2%. Silver, platinum and palladium fell. Markets in China remain closed for the Lunar New Year holidays.
Base metals were mixed, with copper down 0.7% to $9,751 a ton on the London Metal Exchange, while nickel fell 0.6%. LME inventories of both metals declined on Thursday.
Aluminum rose 1.6%, extending gains after United Co. Rusal -- the world’s second-biggest producer -- forecast a global deficit in 2022 of 1.6 million to 1.7 million tons, according to BCS Global Markets.
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