Gold prices are facing downward pressure early on Tuesday as traders take profits ahead of the anticipated US Federal Reserve (Fed) interest rate decision scheduled for Wednesday.
The decline in gold prices is influenced by several factors, including a cautiously optimistic market sentiment and a rebound in the US Dollar (USD). The market is digesting reports of potential truce talks, with CNN News citing sources indicating that Hamas is considering a new framework proposed by Egypt, which could lead to a temporary ceasefire in Gaza in exchange for the release of hostages.
The resurgence of the US Dollar is also impacting gold prices, with the USD staging a comeback after recent losses. This recovery is evidenced by the rebound in the USD/JPY pair following substantial declines on Monday, possibly due to Japanese authorities intervening to support the yen against the dollar.
Furthermore, gold prices are affected by increased expectations that the Fed will maintain a hawkish stance in its policy decision, particularly after the release of higher-than-expected US Core Personal Consumption Expenditures (PCE) Price Index inflation data. The annual Core PCE Price Index rose by 2.8% in April, matching the February level but surpassing expectations for a 2.6% increase.
Despite these pressures, the decline in gold prices is somewhat mitigated by positive manufacturing data from China for April. Improved economic activity in China, the world’s leading gold consumer, supports demand for the precious metal.
Looking ahead, gold traders are focusing on upcoming US economic data, including the ADP Employment Change and JOLTs Job Openings reports, along with the Fed’s policy announcement on Wednesday. Gold prices will continue to be influenced by broader market sentiment and movements in the US Dollar.
