Gold Prices Decline Amid Reassessment of Interest Rate Expectations


Gold prices dropped in Asian trade on Monday, extending decreases from the previous session, as markets reassessed anticipations for early interest rates reduces in response to stronger-than-expected the United States labour data.

The yellow metal had a poor start to 2024, following the dollar’s sharp rise as traders reduced their bets that the Federal Reserve would cut interest rates as early as March.

Stronger-than-expected nonfarm payrolls statistics on Friday, which demonstrated the labour market’s resilience and gave the Fed more leeway to maintain higher rates for longer, only served to reinforce this idea.

There was also a significant amount of profit-taking in gold following a relatively robust rally through December.

Dollar’s Surge Impacts Gold’s Prices Poor Start in 2024

The yellow metal gained more than 10% by the end of 2023.
Gold futures expiring in February dropped 0.4% to $2,042.25 an ounce by 00:00 ET (05:00 GMT). While spot gold Prices dropped 0.5% to $2,035.69 an ounce. The first week of 2024 saw losses for both instruments of roughly 0.9%.

Focus is on US inflation following the surprise of nonfarm payrolls.
The main focus of the markets was now on the US CPI inflation statistics for December. Which is scheduled for release this Thursday.

It is anticipat that the reading, which follows a robust payrolls report, will demonstrate an increase in inflation from the previous month.

Given that the labour market and inflation are the two main factors the central bank looks at when adjusting monetary polic. Any indications of sticky inflation are bad news for those who were betting on the Fed cutting rates early.

The Federal Reserve has cautioned against reducing interest rates too soon if there are indications of sticky inflation and a robust labour market.

Traders appeared to be decreasing their anticipations for a March cut, according to the CME Fedwatch tool. Instead of the over 73% chance that was priced in the previous week. Traders now anticipated a roughly 63% chance for a 25 basis point reduce in March.

Gold was severely impact by rising rates for the majority of 2023. Higher-for-longer rates are expected to signal more short-term pressure on the metal. Although a rate reduction by the Fed is still anticipated later this year. ING analysts said they had pushed back their projections for a reduction to May from March.

Copper Prices Rebound After Initial Decline in 2024

The opportunity cost of investing in bullion, which has no yield, increases due to high interest rates.
After a slow start to 2024, copper rises, with more China cues to come.

Copper prices, one of the industrial metals, cautiously increased on Monday following a steep decline in the first week of 2024.

March-dated copper futures increased by 0.3% to $3.8128 per ounce, following a 2.2% decline over the previous week.

A strong dollar and poor purchasing managers index statistics from several major economies, most notably China, which is a top importer, hurt prices.

This week, China is expected to release more economic indicators; on Friday, inflation and trade data are anticipated. Imports of copper from China will be a major area of interest for red metal traders.