Copper Declines on COVID Fears in China; Gold to Decline Weekly

China, the largest copper importer in the world, denied speculations that it might loosen COVID requirements, leaving copper prices constant on Friday.

As the dollar rises due to the Federal Reserve's hawkish moves, metal markets are likely to conclude the week in the red.

Thursday, China's Ministry of Health reaffirmed its commitment to the zero-COVID policy, dispelling recent speculations that the country may quit the program by March 2023. The statements also coincide with an increase in contagious diseases across the nation, which has led to new traffic restrictions in a number of major cities.

Copper futures were flat at $3.4220 per pound at 20:17 ET (00:17 GMT), following a fall of 1.4% in the prior session. They were also expected to lose 0.3% this week.

Due to anticipation that a downturn in China's economic activity may limit the country's metal demand, prices for the red metal dropped this year. Fears of a global recession weighed on the metal, which is typically supported by an improving economy.

In the following months, however, a decline in available supply may cause the price of the red metal to rise. Significant Peruvian copper mine Las Bambas suspended operations this week as a result of frequent blockades by locals.

This, together with a strike at the world's largest copper mine and sanctions on Russian manufacturers, is expected to reduce copper supplies in the coming months.

Rising interest rates and the strength of the U.S. dollar are expected to moderate metal prices in the coming months. After the Federal Reserve boosted interest rates and foreshadowed additional monetary tightening, gold, which is more sensitive to interest rates than other commodities, was anticipated to decline by over 1 percent this week.

Gold spot prices rose 0.1% to $1,631.88 per ounce on Friday, while gold futures rose 0.2% to $1,633.75 per ounce. Following this week's Fed move, both instruments were recovering marginally from a string of sharp falls.

The Fed's interest rate hikes resulted in huge losses for gold this year, as the opportunity cost of holding the yellow metal soared.

The focus now switches to the U.S. nonfarm payrolls report expected later in the day, which is expected to reflect resilience in the labor market. This will certainly provide the Fed with enough economic wriggle room to continue rising interest rates, as foreshadowed by the central bank this week.