GOLD PRICE REMAINS ON THE BACKFOOT AHEAD OF FED POLICY MEETING

• Gold price falls further as US Dollar rises ahead of Fed’s monetary policy announcement.
• The Fed’s dot plot will be the key trigger in the monetary policy meeting.
• US Treasury yields fall modestly but broadly remain firm.

Gold price (XAU/USD) remains under pressure as investors await the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 18:00 GMT. The Fed is expected to maintain interest rates unchanged as the victory against stubborn United States inflation is still out of sight. Investors will keenly focus on the Fed’s dot plot and economic forecasts, which will indicate interest rate projections and the outlook on the US economic performance, respectively.

Market participants will also pay attention to Fed Chair Jerome Powell’s press conference to get cues about the timing of rate-cuts. Currently, expectations for the Fed lowering interest rates in the June meeting have eased somewhat. Fed policymakers said they want to see inflation easing for months as evidence to confirm that price growth will return to the 2% target. However, inflation data for the first two months of 2024 signaled that price pressures remain sticky.

Meanwhile, 10-year US Treasury yields have come down gradually to 4.28% from their three-month high of 4.35%. A hawkish Fed guidance would increase yields on Treasury bonds. Ahead of the Fed, the US Dollar Index (DXY) continues its winning spell for the fifth trading session as stubborn inflation pressures have cast doubts over the Fed’s prior three rate-cut projections for this year.