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Gold Prices Flat Ahead of US Payroll Data, Copper Boosted by China Reopening

Gold prices were largely flat on Friday as investors awaited the release of key US nonfarm payroll data, while copper prices reversed weekly losses following the relaxation of anti-COVID measures in China.

Gold Ingots
Gold Ingots

Spot gold rose 0.1% to $1,834.53 per ounce, and gold futures fell 0.1% to $1,839.25 per ounce. Despite the slight movements, both instruments are set to end the week with a 0.5% gain, marking their third straight week in the black.

The expected slight easing in US nonfarm payrolls for December suggests some cooling in the labor market following a series of interest rate hikes by the Federal Reserve in 2022. However, as the reading has consistently exceeded estimates for the past eight months, there are concerns that any signs of resilience in the job market could give the Fed room for more aggressive action.

Gold Prices Supported by Slow Interest Rate Hikes and Safe Haven Demand

Gold prices have been supported by recent indications from the Fed that it will likely raise interest rates at a slower pace in 2023 after a series of sharp hikes in the previous year. The possibility of a recession in 2023 has also led to an increase in haven demand for bullion. However, central bank policymakers have indicated that they will likely hold higher rates for longer, focusing on curbing inflation. This has created uncertainty about the peak of US rates, as inflation remains significantly above the Fed's target 2% rate.

Haven demand has helped gold outperform other precious metals for the week. Platinum futures have fallen 1.3%, and silver futures have dropped nearly 3%. Copper prices have been more volatile, trading flat after reversing recent losses on Thursday following the announcement that the Chinese government will reopen the border with Hong Kong on January 8. The move points to the relaxation of additional anti-COVID measures in China and has fueled optimism about a broader reopening in the country. Copper futures are currently flat at around $3.8252 per pound and are set for a third straight week of gains following a 2% rally on Thursday.

However, China is facing a surge in COVID-19 cases after relaxing restrictions in December, which could delay a broader reopening and cause near-term market volatility, according to analysts.