Strength in Gold and Copper Continues – But for How Long?

By Pete Southern in Gold and Oil News | May 27, 2024 16:30 | Tags: , , , , , ,

As we start the new week, gold has displayed gains during the early parts of Monday’s trading, this implies that the precious metal is potentially reversing from its past week’s declines.

However, despite the challenges it faced in the past week, overall gold remains in an uptrend, and it is supported by a number of market factors. Some of the leading contributors to the gold price surge is a softer U.S. Dollar and escalating Middle Eastern geopolitical tensions, which both tend to strengthen gold as the go-to safe-haven asset.

Moreover, demand by central banks on gold is expected to offer a long-term support. Accordingly, the biggest declines in gold prices during the past week of trading took place when some of the biggest buyers of the precious metal such as the People’s Bank of China and Russia’s central bank were not actively purchasing gold.

A number of signals appear to be a bit downbeat. Firstly, amid strong economic data, expectations of a Federal Reserve rate cut are diminishing. Secondly, with no clear signals for central banks to keep rates low this cycle, a stronger dollar is also bearish for the U.S. dollar-denominated gold prices. Accordingly, opportunities for gold to hit new record highs before the end of the month may also be limited.

On the base metals front, copper prices have been stabilizing after they eased from their recent highs. One month copper futures were up by 0.3% to settle at $4.7720 per pound.

The May surge to record prices was mainly driven by speculative trading. However, there is concern about the physical demand for copper and if it will meet some of the past-month speculations regarding the tightness of the copper market.

Moreover, the biggest factor that could change the prices of copper is further developments in China. The Asian economic power is in the process of deciding how to finance this year’s raft of economic stimulus measures. A lot of the packages to stimulate the economy involve copper, and investors are bound to provide further storage to see if some of these measures will be implemented and how they will impact copper exports.

Pete Southern About Pete Southern
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.

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