Gold prices witnessed a decline in Asian trading on Monday, slipping below a significant support level as investors adopted a cautious stance towards non-yielding assets ahead of signals expected from a Federal Reserve meeting later this week.
Simultaneously, the rally in industrial metals seemed to have hit a pause, with copper prices retracting after reaching 11-month highs last week. Profit-taking ensued in the red metal amidst middling Chinese economic data.
The retreat in precious metals was accentuated as the dollar stabilized near two-week highs in anticipation of the Federal Reserve’s meeting. Furthermore, 10-year Treasury yields maintained their position comfortably above 4%.
Spot gold recorded a 0.4% decline, settling at $2,148.19 per ounce, while gold futures expiring in April experienced a 0.5% drop to $2,151.05 per ounce by 00:20 ET (04:20 GMT).
Investors Await Fed Meeting for Interest Rate Clues
Attention has now shifted to the culmination of the two-day Federal Reserve meeting scheduled for Wednesday, during which the central bank is widely expected to maintain interest rates at their current levels.
However, the focus remains on any indications regarding potential interest rate adjustments, particularly in light of February’s hotter-than-expected inflation figures, which have put markets on alert for hawkish signals from the Fed.
This sentiment prompted a significant retreat in gold prices from the record highs reached earlier in March, with the breach of the $2,150 support level potentially signaling further losses in the short term.
ANZ analysts highlighted in a recent report the possibility of gold prices dropping to as low as $2,100 per ounce in the near term. Nonetheless, they revised their end-2024 price target for gold to $2,300 per ounce, citing potential support from an eventual interest rate cut and worsening economic conditions later in the year.
Other precious metals also faced downward pressure on Monday, with platinum futures slipping by 0.7% to $935.50 per ounce, and silver futures declining by 0.7% to $25.198 per ounce.
Copper Prices Ease Amid Mixed Chinese Data
Three-month copper futures on the London Metal Exchange experienced a 0.3% decrease, reaching $9,045 per ton on Monday, while one-month U.S. copper futures fell by 0.3% to $4.1092 per pound.
Despite these declines, both instruments remained within sight of the 11-month highs attained last week, propelled by reports suggesting potential production cuts by China’s largest copper smelters. Such a scenario could lead to a shortage in refined copper supply, thus driving copper prices higher.
However, the rally in copper moderated on Monday following mixed economic data from China. While industrial production exceeded expectations during the January-February period, retail sales fell short of projections, and unemployment reached a five-month high.
The varied data raised concerns regarding weak economic growth in the world’s largest copper importer, potentially dampening its demand for the red metal.