In the European session on Tuesday, the price of gold (XAU/USD) dipped to $2,150 as a robust US Dollar exerted pressure on the precious metal. The appeal for gold remained muted amidst apprehensions preceding the Federal Reserve’s impending monetary policy announcement and the unveiling of the quarterly dot plot on Wednesday.
Market expectations anticipate the Federal Reserve to maintain interest rates within the 5.25%-5.50% range for the fifth consecutive time. However, investors remain on edge due to uncertainties surrounding projections for potential rate cuts. Speculation persists regarding the timing of rate adjustments, with some investors scaling back bets on an imminent rate reduction in June. This sentiment has contributed to downward pressure on gold prices.
Moreover, the 10-year US Treasury yields, while experiencing a slight decline to 4.32%, continue to demonstrate resilience, buoyed by optimism that the Fed‘s first rate cut, initially forecasted for June, may be postponed. The prospect of delayed monetary policy adjustments has influenced market sentiment, impacting the appeal of gold as a hedge against inflation.
Concerns have also been raised by higher-than-anticipated consumer and producer inflation data, further clouding the outlook for future Fed rate cuts. These factors collectively underscore the current challenges facing gold prices, amidst a backdrop of dollar strength and evolving market expectations regarding monetary policy.
