H.G Markets:

Gold prices retreated towards $2,120 per ounce on Wednesday, as investors adopted a cautious stance ahead of Federal Reserve Chair Jerome Powell’s testimony before the US Congress on Wednesday and Thursday. Powell’s statements are eagerly awaited for insights into the timing and extent of potential interest rate adjustments this year. Additionally, market participants are looking to the monthly US jobs report on Friday for further direction. The precious metal reached new record highs on Tuesday following indications of a slowdown in US economic activity from the latest factory orders and services sector data. These developments bolstered expectations for rate cuts by the Federal Reserve in 2024. Meanwhile, anticipation is high for the European Central Bank’s monetary policy decision on Thursday, which could provide clues about global interest rate trends.

Spot gold slipped by 0.1% to $2,126.30 an ounce, while gold futures expiring in April declined by 0.4% to $2,134.30 an ounce. The metal had hit a record high of $2,142.20 an ounce in spot trading and $2,150.50 an ounce in futures trading on Tuesday. Some investors who missed out on the recent rally in gold seem to be entering the market amid growing concerns of a potential stock market correction. Gold’s upward movement on Tuesday coincided with significant losses in the stock market as it faced correction from record highs.

Investors are now focused on Powell’s two-day testimony, starting later on Wednesday, for more clarity on US interest rates. Powell is expected to maintain a cautious stance and may not provide strong signals for rate cuts, particularly given the persistent inflationary pressures in the US. Several Fed officials have also indicated that the Fed is not in a rush to lower rates. The possibility of higher US rates has limited gold’s upside potential over the past year, with the metal experiencing a rapid decline after reaching record highs in December. This trend could continue to constrain gold’s current rally, especially if Powell’s remarks are more hawkish than anticipated.

Other precious metals showed mixed performance this week, generally lagging behind gold. Platinum futures rose by 0.5% to $89.60 an ounce, while silver futures fell by 0.5% to $23.85 an ounce. Despite the uncertainty surrounding Powell’s testimony, traders continue to bet on a 25 basis point rate cut by the Fed in June, according to the CME Fed watch tool. Apart from Powell’s testimony, market attention this week is also on the nonfarm payrolls data for February. Among industrial metals, copper futures for May delivery stabilized around $3.8518 per pound, showing little reaction to China’s 2024 economic outlook, which was deemed underwhelming, along with Beijing’s limited signals on additional policy support for the economy.