Gold Falls Below $1,750 on Fed Hawkishness, But Copper Rises

Gold prices dropped below a key support level on Tuesday after hawkish Fed comments raised worry about U.S. monetary policy. Copper prices stayed constant as investors awaited developments in China.

James Bullard, president of the Federal Reserve Bank of St. Louis, said Monday that the Fed has "a long way to go" in raising interest rates and may do so until 2024 to fight inflation. He also said rates must rise 1 percentage point to 5 to 5.25 percent.

Separately, New York Federal Reserve President John Williams said the central bank will likely start decreasing interest rates in 2024 when inflationary pressures abate. He said rates must rise to combat inflation.

The dollar climbed 0.7% on Monday after their comments. This hurt commodities markets, particularly gold.

Spot gold stayed at $1,741.33 per ounce, while December futures traded at $1,740.00 per ounce, in backwardation. Both declined 0.6% on Monday.

Bullard and Williams' speeches clarified U.S. monetary policy but reduced expectations for a slower pace of rate hikes by the Federal Reserve in the coming months, given that rates are expected to reach much higher peaks.

As U.S. interest rates have climbed, non-yielding assets like gold have lost value.

Gold saw modest safe-haven demand this week, despite historic civic unrest in China.

Copper fell as much as 2% to start the week before rebounding to trade higher.

China's protests may reduce the country's appetite for commodities, dimming the outlook for gold. Chinese people in many major cities protested the zero-COVID policy over the weekend.

Early Tuesday, copper futures were flat at $3.6018 per pound.

Other commentators say the protests in China may push the government to change its zero-COVID policy, which is causing China's economic slowdown this year. This would benefit commodity markets.

On the supply side, sources say Escondida employees won't strike in the future months, reducing the chance of a shortage.