Gold prices dip below $2,150 prior to Fed meeting

In Asian trading on Monday, gold prices experienced a decline as traders shied away from non-yielding assets ahead of the Federal Reserve meeting later in the week, where more signals on interest rates were anticipated.

Meanwhile, the rally in industrial metals seemed to have hit a pause, with copper prices easing after reaching 11-month highs last week. The market witnessed some profit-taking in response to middling Chinese economic data.

The losses in precious metals were more pronounced, especially as the dollar stabilized near two-week highs in anticipation of the Federal Reserve meeting. Additionally, 10-year Treasury yields remained comfortably above 4%.

Spot gold dipped by 0.4% to $2,148.19 an ounce, while gold futures expiring in April declined by 0.5% to $2,151.05 an ounce by 00:20 ET (04:20 GMT).

Investors were eagerly awaiting the conclusion of the two-day Federal Reserve meeting on Wednesday, where the central bank was widely expected to maintain steady interest rates. However, any indications of potential interest rate cuts would be closely monitored, particularly following hotter-than-expected inflation readings for February, which had raised concerns about hawkish signals from the central bank.

This shift in sentiment pulled gold prices away from their record highs earlier in March. Furthermore, dropping below the $2,150 support level suggested the potential for further losses in the near term.

Analysts at ANZ suggested in a recent note that gold prices might decline to as low as $2,100 an ounce in the short term. However, they also revised their end-2024 price target for gold to $2,300 an ounce, citing the likelihood of eventual interest rate cuts and deteriorating economic conditions, which were expected to support demand for the yellow metal this year.

In addition to gold, other precious metals also retreated on Monday, with platinum futures falling by 0.7% to $935.50 an ounce, and silver futures sliding by 0.7% to $25.198 an ounce.

As for copper, three-month futures on the London Metal Exchange dropped by 0.3% to $9,045 a ton on Monday, while one-month U.S. copper futures fell by 0.3% to $4.1092 a pound. Although both instruments weakened slightly, they remained close to the 11-month highs reached last week, driven partly by reports indicating planned production cuts by China’s largest copper smelters. However, this rally tempered on Monday following mixed economic data from China, raising concerns about weak economic growth in the world’s largest copper importer and its potential impact on copper demand.