By Ambar Warrick
Investing.com-- Gold and copper prices retreated further on Monday as the dollar notched a new 20-year high amid growing fears of rising interest rates and a potential economic recession.
Metal markets plummeted last week after the U.S. Federal Reserve hiked interest rates and warned of potential economic pain as it looks to combat runaway inflation.
Economic indicators from the Eurozone and the UK also showed a pronounced contraction in business activity, ramping up fears of a recession and denting the demand outlook for metal markets.
Spot gold was unchanged around $1,643.82 an ounce, while gold futures fell 0.3% to $1,651.30 an ounce by 19:31 ET (23:31 GMT). Both instruments are trading at their lowest level since early 2020, after logging sharp losses last week.
The dollar index fell slightly on Monday after briefly hitting a new 20-year high. Strength in the greenback is expected to persist as the Fed keeps raising interest rates.
Gold prices have suffered heavy losses this year as the prospect of rising yields pushed traders into the dollar and Treasuries. Traders are now positioning for more dips in bullion prices, given that gold fell below two key support levels last week- $1,700 and $1,650.
Among industrial metals, copper futures sank 0.4% on Monday to $3.3575 a pound, trading near two-month lows. Prices of the red metal tumbled nearly 5% last week after a swathe of weak economic readings raised concerns over a slowdown in global economic growth.
Copper prices have been hit particularly hard this year by an economic slowdown in major importer China. Slowing industrial activity in the U.S. and Europe has only exacerbated recent losses.
Still, a potential supply crunch, stemming from a strike at Escondida, the world’s largest copper mine, may potentially benefit prices in the long term.