Gold rises after recent losses, but hawkish Fed comments limit gains

By Ambar Warrick

Investing.com-- Gold prices rose on Tuesday, but remained pinned near two-week lows as hawkish signals from some Federal Reserve members supported the dollar, while platinum prices surged on expectations of a potential supply deficit next year.

Metal markets fell in tandem with other asset classes on Monday as investors fretted over a potential global recession stemming from higher interest rates, while fears of more COVID-linked restrictions also dented sentiment. But this opened up metals to some bargain buying.

Spot gold rose 0.3% to $1,740.98 an ounce, while gold futures rose 0.1% to $1,742.25 an ounce by 20:25 ET (01:25 GMT). Both instruments sank about 0.8% on Monday.

San Francisco Federal Reserve President Mary Daly said on Monday that there was more work to be done in order to tighten monetary policy and cool inflation , and that the real-world impact of recent rate hikes will probably be greater than what the short-term target rate implies.

Cleveland Fed President Loretta Mester said she supports a smaller rate hike in December, which is in line with market expectations for a 50 basis point bps hike .

But both Fed chiefs said that future hikes will be largely dependent on U.S. economic readings, particularly the path of inflation.

Metal markets were hit particularly hard by a series of sharp interest rate hikes this year, as the opportunity cost of holding non-yielding assets increased.

Gold sharply pared its annual losses in recent weeks as markets positioned for a smaller rate hike in December. But given that inflation is still well above the Fed’s 2% target, markets are also considering the possibility that the central bank will keep raising rates for much longer than expected.

Such a scenario is bearish for gold and broader metal markets. Focus this week is on the minutes of the Fed’s November meeting , due on Thursday, for more cues on U.S. monetary policy.

Platinum futures surged nearly 1% after the World Platinum Investment Council said on Tuesday that it expects a deficit of the metal in 2023, following a hefty surplus this year.

The precious metal is used in a variety of applications, including vehicle exhausts, industrial purposes, and jewelry.

Among industrial metals, copper prices surged on Tuesday after logging steep losses in recent sessions.

Copper futures rose 0.8% to $3.6075 a pound, after tumbling 1.7% on Monday. The outlook for the red metal has been severely crimped by new COVID lockdowns in China, which is expected to weigh on demand.