By Ambar Warrick
Investing.com-- Gold and copper prices were muted on Tuesday after a strong rally on a weakening dollar, but gains in the red metal were dampened by more signs of weakening global manufacturing activity.
Gold rose sharply on Monday, retaking the $1,700 an ounce level after nearly three weeks. Prices of the yellow metal rose after weak U.S. manufacturing and construction data suggested that the Federal Reserve may have to temper its pace of rate hikes to prevent further economic destruction.
Spot gold fell 0.1% to $1,698.65 an ounce, while gold futures rose 0.3% to $1,707.35 an ounce by 20:35 ET (00:35 GMT). Both instruments rallied over 2% on Monday.
The weak manufacturing data, coupled with similarly dismal readings from Japan, the Eurozone and the UK on Monday, saw copper prices lag metal markets on fears of further demand headwinds.
Copper futures were flat at $3.4180 a pound on Tuesday after rising just 0.8% in the prior session, and were pinned near two-month lows. But the red metal took some support from a weakening dollar, which has weighed heavily on the metals market this year.
The dollar index retreated further from a recent 20-year peak, losing 0.4% and falling for a fourth consecutive session. 10-year Treasury yields also backed away from a near 12-year high.
Markets are now pricing in the possibility that the Fed will eventually pivot to a dovish stance if economic conditions worsen in the country. This comes ahead of key U.S. nonfarm payrolls data this Friday, which is expected to show resilience in the labor market.
But several Fed officials have reiterated the bank’s hawkish stance, and that it is prepared to risk economic strife in its battle against inflation.
U.S. interest rates are widely expected to end the year above 4%, a move that spells more pressure for metal markets.
Weakening manufacturing trends across the globe are also expected to keep industrial metal prices dampened in the near-term, although markets expect a 2023 recovery in activity to boost the space.