Gold prices dip below $2,150 ahead of Fed meeting; copper rally eases

Gold prices declined in Asian trading on Monday, breaching a crucial support level as traders shied away from non-yielding assets ahead of further signals on interest rates from a Federal Reserve meeting later in the week.

The rally in industrial metals seemed to have stalled, as copper prices retreated after reaching 11-month highs last week. Profit-taking in the red metal was prompted by middling Chinese economic data.

Losses in precious metals were more pronounced, especially with the dollar steadying near two-week highs ahead of the Fed meeting. Additionally, 10-year Treasury yields remained comfortably above 4%.

Spot gold decreased by 0.4% to $2,148.19 per ounce, while gold futures expiring in April dropped 0.5% to $2,151.05 per ounce as of 00:20 ET (04:20 GMT).

Market participants await the Fed meeting for further insights into interest rates

Markets are currently fixated on the conclusion of a two-day Fed meeting on Wednesday. The central bank is widely anticipated to maintain rates at their current levels.

However, any indications regarding interest rate cuts will be closely watched, particularly as hotter-than-expected inflation readings for February have put markets on guard against hawkish signals from the central bank.

This sentiment has also caused gold prices to sharply retreat from the record highs reached earlier in March. A breach below the $2,150 support level also suggests the possibility of further losses in the near term.

In a recent note, ANZ analysts suggested that gold prices could decline to as low as $2,100 an ounce in the near term. However, they also revised their end-2024 price target for the yellow metal to $2,300 an ounce. They stated that an eventual interest rate cut and worsening economic conditions were likely to bolster demand for gold this year.

On Monday, other precious metals also retreated. Platinum futures dropped by 0.7% to $935.50 per ounce, while silver futures slid by 0.7% to $25.198 per ounce.

Copper prices decline following mixed Chinese data

Three-month copper futures on the London Metal Exchange dropped 0.3% to $9,045 per ton on Monday, while one-month U.S. copper futures declined 0.3% to $4.1092 per pound.

While both instruments experienced declines, they still hovered near the 11-month highs reached last week. Media reports indicating that China’s largest copper smelters were considering production cuts have contributed to the current situation. This potential supply shortage of refined copper has been a significant factor driving the rally in copper prices.

However, this rally somewhat cooled on Monday in response to mixed economic data from China. Although industrial production exceeded expectations for the January-February period, retail sales fell short of expectations, and unemployment reached a five-month high.

The mixed data raised concerns about sluggish economic growth in the world’s largest copper importer. This could potentially dampen its demand for the red metal.

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