Gold prices muted as Fed week kicks off

By Ambar Warrick

Investing.com -- Gold prices kept to a tight range on Monday as traders hunkered down in anticipation of a Federal Reserve meeting this week, with focus also remaining on any signs of slowing economic growth across the globe.

The Fed is widely expected to raise interest rates by a relatively smaller 25 basis points on Wednesday. But the central bank’s stance on future rate hikes will be closely watched, given that recent data has painted a somewhat mixed picture of the U.S. economy.

While inflation eased as expected in recent months, it still remained well above the Fed’s 2% annual target. The U.S. job market and economic growth also cooled less than expected in late-2022, which gives the Fed more economic headroom to keep hiking rates.

Any hawkish signals from the central bank are likely to be negative for non-yielding assets such as gold. Markets are also awaiting a reading on January nonfarm payrolls later this week.

Spot gold rose 0.1% to $1,929.95 an ounce, while gold futures steadied around $1,928.64 an ounce by 19:20 ET (00:20 GMT).

Focus this week is also on fourth-quarter economic growth data and inflation readings from the euro zone, due on Tuesday and Wednesday, respectively. Any signs of a pronounced slowdown in the region, particularly economic heavyweight Germany, could push up safe haven demand for gold.

The yellow metal benefited from growing fears of a global recession this year, as traders also exited the dollar in anticipation of slower interest rate hikes by the Federal Reserve.

But gold’s rally stalled at nine-month highs after data showed the U.S. economy grew more than expected in the fourth quarter, indicating that the country still remained resilient despite high inflation and rising interest rates.

This also boosted the dollar, although the greenback still languished near nine-month lows on Monday.

Among industrial metals, copper prices rose slightly in anticipation of Chinese markets resuming trade after a week-long holiday.

High-grade copper futures rose 0.1% to $4.2390 a pound, after breaking a five-week winning streak last week.

A slew of Chinese economic data is also awaited this week for more cues on the world’s largest copper importer, after it recently relaxed most anti-COVID measures. A reopening in the Chinese economy is expected to boost global copper demand, which in turn could benefit prices of the red metal.

Expectations of tighter copper supplies also benefited prices, after miner MMG Ltd (HK:1208) flagged potential production disruptions in its Peru mines due to civil unrest in the country.