By Gold prices edged lower on Monday as investors remained concerned about a more cautious approach from the US Federal Reserve in its rate-cutting cycle next year.
“Investors now seem convinced that the Federal Reserve will adopt a more cautious stance on cutting interest rates next year amid signs that the progress in lowering inflation toward the 2% target has stalled,” Haresh Menghani, editor at FXstreet, said in a report.
This should act as a tailwind for the US bond yields and the USD, which, in turn, cap the upside for the non-yielding Gold price.
Gold prices had slipped in the red on Friday after posting a one-month high in the previous session.
Prices have struggled to sustain gains over a period of time as uncertainty over interest rates and geopolitical scenarios weighed on sentiments.
At the time of writing, the February gold contract on COMEX was at $2,670.19 per ounce, down 0.2% from the previous close.
Moreover, a stronger dollar limited demand for the yellow metal on Monday as well. A stronger dollar makes commodities such as gold more expensive for overseas buyers.
Focus on Fed meeting
Gold traders were eagerly waiting for the outcome of the US Fed’s two-day policy meeting on Wednesday.
Traders have priced in a 93.4% probability of the US central bank cutting interest rates by 25 basis points, according to the CME FedWatch tool.
The Fed had already cut interest rates by 75 basis points throughout two meetings in September and November.
However, the market was worried about the central bank’s cautious approach next year with interest rates.
“The yield on the benchmark 10-year US government bond rose to a three-week high on Friday amid bets for a less dovish Fed, which should cap gains for the non-yielding Gold price,” Menghani said.
Meanwhile, the labor market in the US remained resilient, while inflation has been above the Fed’s preferred target of 2% for a while.
Gold price: technical outlook
According to FXstreet, the bears could take control of the gold market if prices slip below $2,643 per ounce level.
Below the level of $2,643, if negativity persists, prices could fall to $2,625 and then to the month’s low of $2,614.
Menghani added:
A convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.
On the flip side, if gold prices could climb above the $2,677 per ounce level, prices could trace their way back up to $2,700.
“The subsequent move up could extend further towards the monthly swing high, around the $2,726 zone, which if cleared decisively will set the stage for a further near-term appreciating move,” Menghani said.
Copper prices fall
Copper prices on the London Metal Exchange fell on Monday on disappointing economic data from China, the largest consumer of the metal.
Economic data on Monday showed that industrial production in the country rose as expected in November. However, retail sales growth declined sharply, while fixed asset investment growth also disappointed.
The figures were released after China’s Central Economic Work Conference last week, which vowed to adopt a more “loose monetary policy” to boost economic activities.
China’s industrial and economic activities have struggled throughout 2024, weighing on demand for commodities.
At the time of writing, the three-month copper contract on LME was at $9,041.50 per ounce, down 0.2% from the previous close.
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