Gold Dips as Dollar Rises, Copper Set for Third Weekly Gain

Gold prices slipped on Friday as the US dollar bounced back on a more optimistic third-quarter gross domestic (GDP) figures, while concerns about a potential tighter supply put copper on track for a third weekly gain.

Spot gold dropped 0.8% to $1,649.62 per ounce, while gold futures were down 0.7% to $1,652.65 per ounce. Both instruments are expected to end on a slightly higher level this week.

Investors sought industrial metals after the Commerce Department reported that US GDP rose to an annualized pace of 2.6% in the third quarter, indicating the country’s better economic performance under an aggressive rate hike environment than previously expected.

However, uncertainty remains in the outlook of the world’s largest economy.

Signs of recovery in the economy provide the Federal Reserve more reason to continue increasing interest rates sharply. That has led the greenback and Treasury yields higher, weakening metal prices.

Prices of the yellow metal have been weighed by higher interest rates this year as the opportunity cost of investing in gold, which has no yields, soared significantly.

The latest GDP data also eased the possibility that the Fed would decide to slow down on its rate hikes at its December meeting, with traders seeing a 75-basis point (bps) hike. The trend may pressure gold prices, especially amid big expectations for higher interest rates.

The US central bank is widely expected to raise rates by another 75 bps next week, marking its fourth straight hike this year.

Copper Set for Third Week of Gains on Supply Concerns

Copper prices showed more optimism this week and are set for a third consecutive week of gains with a 1.5% jump.

Copper futures were trading 1.5% lower to $3.45 per pound on Friday.

The red metal was mostly unaffected by concerns over slow demand in China, the world’s biggest consumer of copper, with focus now shifting to a potential lack of supply. Sluggish output in Chile and US restrictions on a few Russian producers may curb copper supply in the following months.

Moreover, copper demand may rise amid a global push for electrification, with several countries trying to reduce their reliance on fossil fuels. More robust demand for electric vehicles (EVs) is also expected to shore up demand for the red metal.

However, a major commodities trader recently warned that current copper supplies were not enough to meet such an explosion in demand.

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