Gold prices edge lower as hawkish Fed fears persist

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Investing.com-- Gold prices fell slightly on Monday, seeing continued weakness after the Federal Reserve warned that interest rates will remain higher for longer, with strength in the dollar and yields also applying pressure. 

The yellow metal traded largely rangebound in recent weeks as the prospect of higher U.S. interest rates dented its appeal. The Fed had last week warned that rates could still rise further this year, and will fall by a smaller-than-expected margin in 2023, likely remaining above 5%. 

The prospect of higher interest rates bodes poorly for gold, given that it pushes up the opportunity cost of investing in the non-yielding asset. This trade battered gold over the past year, and has limited any major recovery in the yellow metal.

Spot gold fell 0.1% to $1,924.06 an ounce, while gold futures expiring in December fell 0.1% to $1,943.30 an ounce by 23:46 ET (03:46 GMT). 

U.S. government shutdown fears offer limited support 

Rising interest rates also saw investors largely stick to the dollar as their preferred safe haven over gold. This kept sentiment towards gold largely muted, even as global economic conditions appeared to be deteriorating. 

Major economies are dealing with a resurgence in inflation on the back of higher oil prices, which could stymie growth this year. 

Still, the yellow metal found some support in recent sessions, amid growing fears of a U.S. government shutdown. 

Congress has less than a week to authorize a spending plan to avert a government shutdown, barring which, large swathes of government infrastructure is expected to cease operating. 

But while such a scenario appears dire, it has historically offered little support to gold. The yellow metal barely added $20 during the 2018-2019 government shutdown, which was the longest in history at 35 days.

Copper muted amid China property jitters 

Among industrial metals, copper prices moved little on Monday, amid growing concerns over more economic headwinds in major importer China. 

Copper futures steadied at $3.6947 a pound, after ending the prior week slightly lower. 

Concerns over China’s property market came to fore on Monday after embattled developer China Evergrande Group (HK:3333) said it will be unable to issue new debt due to an ongoing government investigation into a unit. 

This ramped up concerns over a broader debt freeze in the property market, which could have dire consequences for China’s economy. The sector is struggling with a three year-long cash crunch, and has seen limited fiscal support from Beijing.

The property market accounts for about a quarter of overall Chinese economic growth, and is also a key driver of copper demand. 

Focus this week is also on Chinese purchasing managers' index data, due on Friday, for more cues on business activity.