HG MARKETS:

Gold prices declined during Asian trading on Monday, breaking through a crucial support level as traders became cautious towards non-yielding assets ahead of the Federal Reserve meeting later in the week. The rally in industrial metals seemed to have paused, with copper prices easing after reaching 11-month highs last week. Moderate Chinese economic data prompted some profit-taking in copper. Precious metals experienced greater losses, as the dollar stabilized near two-week highs ahead of the Fed meeting. Additionally, 10-year Treasury yields remained above 4%.
Investors exercised caution as they awaited monetary policy decisions from major central banks including the Federal Reserve, Bank of Japan, Reserve Bank of Australia, and Bank of England. Additionally, significant economies are poised to release inflation and PMI figures. Most central banks are expected to keep their benchmark rates unchanged this week, with traders looking for hints about potential rate cuts later in the year. Moreover, the Bank of Japan is anticipated to move away from its negative interest rate policy, influenced by factors such as rising wages, elevated inflation, and a stable economy.
Investors are eagerly awaiting the outcome of the two-day Federal Reserve meeting on Wednesday, anticipating that the central bank will maintain interest rates at current levels. However, attention will be focused on any indications regarding potential interest rate cuts, particularly in light of hotter-than-expected inflation figures for February, which have raised concerns about possible hawkish signals from the Fed. This sentiment has prompted a significant retreat in gold prices from their recent record highs in March. The breach below the $2,150 support level also suggests the possibility of further losses in the short term.
According to analysts at ANZ, gold prices may decline to as low as $2,100 per ounce in the short term. However, they have revised their end-2024 price target for gold upward to $2,300 per ounce. They cited expectations of an eventual interest rate cut and worsening economic conditions as factors likely to bolster demand for gold this year. In commodity markets, three-month copper futures on the London Metal Exchange dropped by 0.3% to $9,045 a ton on Monday, while one-month U.S. copper futures decreased by 0.3% to $4.1092 a pound.
Although both gold and copper experienced some weakening, they remained close to the 11-month highs achieved last week. This trend followed reports indicating that China’s largest copper smelters were considering production cuts, which could lead to a shortage of refined copper and contributed to the recent rally in copper prices. However, this rally moderated somewhat on Monday due to mixed economic data from China. While industrial production exceeded expectations for the January-February period, retail sales fell short of forecasts, and unemployment reached a five-month high. The conflicting data raised concerns about sluggish economic growth in the world’s leading copper importer, potentially dampening its demand for the metal.