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Gold prices rise before more economic cues; Copper surges on China hopes

Investing.com-- Gold prices advanced on Tuesday, tracking mild weakness in the dollar as traders hunkered down before a slew of key U.S. economic readings this week, although the prospect of higher-for-longer U.S. interest rates still kept gains subdued.

Among industrial metals, copper prices rallied 1% on reports that the Chinese government was preparing more measures to support local markets. China is the world’s largest copper importer, and has been a key pain point for copper prices.

Traders were now seeking more cues on the U.S. economy, amid waning bets that the Federal Reserve will begin cutting interest rates by as soon as March 2024. This notion had weighed heavily on gold earlier in January, pushing prices of the yellow metal as low as $2,000 an ounce.

But gold rebounded from its 2024 lows, as worsening geopolitical conditions in the Middle East spurred safe haven buying. Bullion prices were also supported by bets that the Fed will loosen monetary policy eventually this year.

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Spot gold rose 0.4% to $2,029.53 an ounce, while gold futures expiring in February rose 0.4% to $2,030.70 an ounce by 00:34 ET (05:34 GMT).

US GDP, inflation cues awaited as March rate-cut bets dwindle

Focus was now squarely on fourth-quarter U.S. gross domestic product data, due this Thursday, which is expected to show some cooling in overall growth.

But any signs of resilience in the U.S. economy are likely to give the Fed more headroom to keep rates higher for longer. The central bank is widely expected to hold rates at 23-year highs when it meets next week.

But before that, PCE price index data- the Fed’s preferred inflation gauge- is due this Friday, and is expected to reiterate that inflation remained sticky in December.

Signs of sticky U.S. inflation and labor market strength, coupled with hawkish warnings from Fed officials, saw traders largely reverse bets on a March rate cut. Part of this reversal triggered steep losses in gold prices earlier in January.

High rates bode poorly for gold, given that they push up the opportunity cost of investing in the yellow metal. This trade limited any major upside in gold prices over the past two years.

Copper jumps nearly 1% on China hopes

Copper futures expiring in March rose nearly 1% to $3.7823, recovering a bulk of their losses made this year.

Gains in copper tracked a broader increase in Chinese financial markets, after Bloomberg reported that Beijing was considering a 2 trillion yuan ($278 billion) support package for mainland stocks.

The report ramped up optimism over more support for the Chinese economy, which could keep copper demand in the country strong in the coming months.

An economic slowdown in China was a major weight on copper prices over the past two years, as markets grew cautious over potential weakness in the country’s appetite for the red metal.

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