Gold Prices Dip in Asian Trade Amidst Extended Fed Interest Rate Speculations


Gold prices dropped in Asian trade on Monday as bets grew that the Federal Reserve would continue to hold interest rates higher for longer, but some safe-haven demand and near-term dollar deficits held the yellow metal above key levels.

In January, traders unravelled bets that the Fed would start lowering interest rates as early as March 2024, which led to a sharp increase in profit-taking and a sharp decline in gold prices. This unravelling reached a boiling point late this past week when the yellow metal nearly broke below the $2,000 per ounce mark.

However, gold was well-liked at that level, primarily due to rising demand for safe haven assets in the face of escalating hostilities in the Middle East.

Bullion prices were also helped by some short-term profit-taking in the dollar. Which dropped on Monday after hitting a low of more than one month.

But the possibility of higher U.S. rates for a longer period of time continued to put pressure on gold.

Dollar Fluctuations and Gold: Short-Term Profit-Taking Versus Lingering Rate Hike Concerns

Gold futures expiring in February dropped 0.2% to $2,024.30 an ounce by 00:31 ET (05:31 GMT), while spot gold fell 0.3% to $2,022.91 an ounce.

In contrast to early expectations for a rate cut. The CME Fedwatch tool revealed on Monday that traders were now prices in a greater chance that the Fed will remain at rates steady in March.

The tool indicated a 52.9% probability of unchanged interest rates from the 19% observed the previous week, a significant increase.

A 25 basis point reduce also price in by traders at 46.2%, a significant decrease from the 76.3% chance observed one week prior.

The change in outlook coincided with a chorus of Fed officials saying that rate cuts were not appropriate at this time, particularly given the persistently sticky inflation. It is also generally anticipat that the central bank will hold rates when it meets the following week.

However, this week’s important the United States economic readings are due before that. The PCE price index, the Fed’s preferred inflation indicator, is due on Friday. While fourth-quarter GDP statistics is due on Thursday.

Both readings are likely to have an impact on the Fed’s rate-setting decisions this year. The timing and extent of the Fed’s prospective rate cuts are still unknown. But gold is predict to eventually profit from them.

Copper Prices Respond to Economic Concerns: China’s Impact on Industrial Metals

The price of copper, one of the industrial metals, decreased marginally on Monday and held onto the majority of its January losses.

March-expiring copper futures decreased 0.4% to $3.7752 per pound and had already dropped 3% in January.

Growing scepticism about China, the world’s largest importer, seeing an economic rebound after the nation posted disappointing GDP numbers for the fourth quarter battered the red metal.

On Monday, there were no signs of improvement in the perception of China as the People’s Bank of China maintained record low benchmark lending rates, indicating that it had little room to further loosen policy and promote growth.

This week will see a plethora of PMI readings from several major economies outside of China. All of which are predict to demonstrate persistent weakness in business activity.