China’s weak GDP target negatively affects copper, while gold prices remain mixed

On Monday, gold prices were mixed amid uncertainty over US monetary policy, while copper prices fell sharply as major importer China set a weaker-than-expected GDP target for 2023, weakening expectations of a strong recovery in demand.

Bullion prices were supported by the dollar’s slump last week and broke the streak of five-week losses as investors reassessed their expectations for a US rate hike this year.

Spot gold fell 0.2% to $1,852.26, while gold futures rose 0.2% to $1,858.15. Both instruments gained more than 2% in the past week.

Dollar pressure on metal markets kicked in again on Monday as the dollar stabilized after Friday’s sharp decline. U.S. Treasury yields also hovered just below 4%.

Markets are betting the Fed’s target rate will likely peak in the coming months before the bank pauses or reverses its hawkish stance due to mounting economic pressure.

However, the possibility of a slowdown in economic growth added to the pressure from the weak GDP target from China, putting heavy pressure on copper prices. Chinese government officials, in a statement over the weekend, predicted that the economy will grow by 5% in 2023, after a 3% increase in 2022.

Copper futures fell 0.5% to $4,0557.

ING analysts described China’s forecast as “weaker than expected” and said the government may have noticed that foreign demand for Chinese exports is weakening, which will negatively impact local activity.

The forecast has also raised fears that the recovery in China will not be as strong as initially thought, even if the country loosened most of its COVID-19 restrictions earlier this year.

But business activity in the world’s second-largest economy rose to pre-COVID-19 levels in February, according to data released last week. This triggered strong increases in copper, but the red metal now appears to have largely reversed.

Other precious metals painted a mixed picture as uncertainty about exactly where US interest rates will peak. Platinum fell 0.2% to $977.30, while silver rose 0.3% to $21,308.

This is a bad sign for metals markets, as rising interest rates increase the opportunity cost of holding non-yielding assets.

The focus will be on US February nonfarm payrolls data, along with a presentation by Fed Chairman Jerome Powell this week.

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