Gold Hits 3-month High As Powell Signals End to Rate Hikes

Gold prices rose to a three-month high on Thursday as a result of Federal Reserve Chair Jerome Powell's prediction of fewer interest rate hikes, while copper prices surged to a two-week high as a result of a reduction in COVID-19 lockdowns in China.

The Fed chair noted in a speech delivered in Washington that the central bank will likely moderate its rate hikes in the coming months as it monitors the effects of this year's major interest rate hikes on the economy.

Powell cautioned, though, that the U.S. interest rate peak will be substantially higher than anticipated, in part because of persistently high inflation. In October, the Fed's preferred inflation gauge, the personal consumption expenditures price index, was well above the Fed's target of 2%.

Nevertheless, Powell's comments prompted a broad-based bounce in metal markets, as the prospect of slower rate hikes brought some short-term solace to markets hammered by rising interest rates this year.

Spot gold rose 0.5% to $1,778.20 per ounce, while gold futures expiring in February rose 1.8% to $1,791.25 per ounce, their highest level since mid-August. On Wednesday, both assets increased by more than 1 percent.

In addition, gold prices posted substantial gains in November, as several Fed officials predicted fewer rate hikes in the coming months.

However, the outlook for gold is clouded by uncertainty over where U.S. interest rates will peak, given that the Fed's terminal rate will be determined in large part by U.S. inflation.

Copper prices reached their highest level in over two weeks on the back of optimistic indications of China's reopening.

Copper futures were unchanged near $3.7838 per pound on Thursday, after gaining more than 4% in the prior session, their largest gain in over a month.

This week, China loosened COVID-related restrictions in two major cities in response to growing public opposition to the country's strict zero-COVID policy, which has sparked unprecedented protests across the nation.

This year, China's zero-COVID policy wreaked havoc on its economy, disrupting corporate activities and dampening the country's appetite for commodities.

However, it is widely anticipated that the reopening of the world's largest copper importer will stimulate a demand recovery, thereby increasing copper prices.