Gold prices were flat on Thursday, but were on course for its worst weekly performance since 2021.
Hot US inflation and dovish signals from the Federal Reserve cast doubts over further interest rate cuts in December.
Among industrial metals, copper prices were in the green on Friday, but were headed for steep weekly loss on the back of a strengthening dollar and concerns about poor China demand.
According to Commerzbank AG, metal prices are expected to fall further if the dollar index continues to rise.
A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers.
Gold price falls sharply
Gold prices on COMEX were down about 4.5% so far this week. This was the precious metal’s worst week since June 2021.
The yellow metal had fallen from record highs since the outcome of the 2024 US presidential election last week as the dollar surged.
The price decline has been accompanied by significant outflows from gold ETFs, totalling almost 22 tons since the beginning of the month, according to Bloomberg.
Additionally, earlier this week, the US consumer price index for October remained high.
On Thursday, at a Dallas event, Fed Chair Jerome Powell said that the labour market remained resilient and the economy was strong, which meant the US central bank had to be careful with further rate hikes.
According to the CME FedWatch tool, traders priced in a 62.1% probability of the Fed cutting rates by 25 basis points at its December meeting.
Source: CME Group
Undersupplied silver market
According to the Silver Institute’s latest report, demand should increase by 1% to 1.21 billion ounces, reaching the second-highest level since records began.
Industrial demand is expected to increase by 7% to a record level, driven by electrical and electronic applications.
Increases are also expected for jewellery and silverware.
In contrast, physical investment demand is expected to fall by 15% to a four-year low
However, silver supply is expected to increase by 2% to 1.03 billion ounces, less than the expected rise in demand.
This year, the silver market is expected to show a supply deficit for the fourth year in a row, which at 182 million ounces is likely to be considerable again.
Nonetheless, silver prices on COMEX were under pressure this week with prices falling below $30 per ounce on Thursday for the first time in two months.
Metals market may remain subdued
Copper prices rose on Friday after nursing steep losses throughout this week. However, experts see the price rise as just a temporary rebound.
According to Commerzbank, metal prices are expected to fall even further if the dollar continues its upward trajectory.
Copper prices have fallen nearly 3% so far this week as a firm dollar weighed on sentiments.
Source: Commerzbank AG
Prices were also under pressure on mixed economic data from China, the top consumer of the red metal.
Data from the National Bureau of Statistics showed on Friday that industrial output grew slower than expected in October. But, retail sales rose more than expected during the Golden Week holiday.
“However, there are also many critical voices pointing to the scarcity of copper concentrate, which is slowing down production,” Volkmar Baur, FX analyst at Commerzbank, said in a report.
According to the German bank, the deficit in supply could exceed 1 million tons next year.
At the time of writing, the three-month copper contract on the London Metal Exchange was $9,168 per ton, up 1.5% from the previous close.
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