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Gold prices inched lower on Monday as the U.S. dollar held firm and market pricing centered on an interest rate cut from the Federal Reserve as early as March withered in recent days, weighing on non-yielding bullion. Spot gold (XAUUSD:CUR) was down -0.31% to $2,022.71 an ounce by 6 am ET.
Oodds on a Federal Reserve cut in March have shifted to 50-50 following solid retail sales data and consumer sentiment. Reports on U.S. GDP and the core PCE price index could change the equation, with a lot riding on the core PCE rising 0.2% or less in December. San Francisco Fed President Mary Daly cautioned Friday that it is premature to think that rate cuts are around the corner and that policymakers “don’t want to loosen policy too quickly, only to find that inflation gets stuck at way above target.”
Meanwhile, all 85 respondents to the Reuters poll for the ECB see no change on Thursday, given how much push back there was from policy makers at Davos last week.
In the agriculture complex, the grain sector remains under pressure from improved crop weather in Brazil, adding to the risk of a large carryout this summer after recent stock upgrades saw soybean futures drop to their lowest level in more than two years and corn futures set a three-year low, Saxo Bank’s Ole Hansen note. “In the week to January 16, the last remaining long position in soymeal also flipped to a net short. Overall, the near 500,000 contract net short represents a nominal value of $15 billion.” Wheat futures were trading lower on the day, with soybean and cocoa trading in green.
Copper prices in the meanwhile changed course to trade lower in cautious trade, after advancing ahead of several central bank meetings. Record high U.S. equities prices had boosted risk sentiment in the broader financial markets, including metals, a metals trader told Reuters. Iron ore futures clocked a third consecutive weekly loss as expectations of further stimulus measures in China wane. ANZ said, the market continues to fret about recent supply disruptions including the forced closure of the Panama Cobre mine and Anglo American’s decision to drastically cut output from its own copper operations. Zinc and nickel have also been hit with supply cutbacks.
Elsewhere on the energy side, oil prices gained amid ongoing geopolitical concerns in the Middle East and an attack on a Russian fuel export terminal over the weekend. However, price movement remained capped on the upside by economic concerns.
“Commodities meanwhile saw broad selling being led by the grains sector, and hedge funds reacted accordingly with a 40% drop in the net long across 24 major commodities futures being driven by a jump in short bets,” Saxo Bank’s Hansen added.
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