Gold And Copper Fall As China's Uncertainty Strengthens The Dollar

China's reaffirmation of its zero-COVID policy heightened worries of a slowing economy and boosted the yuan, sending gold and copper prices to fall on Monday, erasing significant gains from the previous session.

In the early Asian trading session, spot gold fell 0.4% to $1,674.12 per ounce, while gold futures fell 0.5% to $1,677.30 per ounce. Following the announcement of stronger-than-expected U.S. nonfarm payrolls data for October, gold prices increased significantly on Friday, while the dollar fell.

On Monday, however, the dollar reversed its previous declines, with the dollar index increasing 0.2%. Chinese health officials said over the weekend that the government remained "unwaveringly" committed to its stringent zero-COVID policy, damping expectations of a U-turn that had prompted a big stock market increase the previous week.

The decision augurs future supply chain and economic problems emerging from the country, which boosted the dollar. Since growing interest rates have raised the potential cost of holding gold, the dollar has significantly overtaken gold as a safe haven.

The Federal Reserve has declared that it would continue to increase interest rates to battle inflation, which is expected to exert downward pressure on gold over the next several months. The positive employment report released last week gives the central bank greater room to raise interest rates.

This week's focus is on the U.S. inflation numbers for October, which are anticipated to show that price pressures remained around their highest levels in forty years. The Fed is likely to take further aggressive measures in response to such a reading.

China, the world's largest importer of the industrial metal, is anticipated to lower its demand for copper on Monday, leading copper prices to drop significantly. Copper futures decreased by 2% to $3,62.35 per ounce, erasing Friday's significant increase.

This year, China's zero-COVID policy halted the nation's economic development and hampered its appetite for imports of raw materials. It is predicted that commodity markets will continue to collapse as a consequence of the nation's reaffirmation of its commitment to the program.

In spite of this, copper prices are anticipated to increase substantially in the coming months as a result of a tighter supply, especially as Chile, the world's largest copper producer, reduces production.

In addition to sanctions imposed by the United States on Russian exporters, rising demand in the electric vehicle industry is expected to constrain supply.