GOLD PRICE DROPS TO OVER ONE-WEEK LOW AMID REDUCED FED RATE CUT EXPECTATIONS

• Gold price remains depressed for the third straight day on Monday, albeit lacks follow-through.
• Expectations that the Fed will keep rates higher for longer continue to undermine the XAU/USD.
• Geopolitical risks help limit the downside ahead of the key FOMC policy decision on Wednesday.

Gold price (XAU/USD) trades with a negative bias for the third straight day on Monday and drops to the $2,050 level, or over a one-week low during the Asian session. The stronger inflation data released from the US last week fuelled speculations that the Federal Reserve (Fed) will stick to its higher-for-longer interest rates narrative. The outlook remains supportive of elevated US Treasury bond yields, which, in turn, acts as a tailwind for the US Dollar (USD) and undermines the non-yielding yellow metal.

The markets, however, are still pricing in a greater chance that the Fed will start cutting interest rates in June. This, along with geopolitical risks, should help limit the downside for the safe-haven Gold price and should limit deeper losses. Traders might also prefer to wait for more cues about the Fed's rate-cut path before placing fresh directional bets. Hence, the focus remains glued to the outcome of the highly anticipated two-day FOMC monetary policy meeting, scheduled to be announced on Wednesday.