Gold is under pressure as Fed rate drop predictions for June fade.

Gold prices (XAUUSD) rise in Friday’s European session. As US bond yields fall marginally after a robust rally on Thursday. Market expectations for the Federal Reserve (Fed) to cut interest rates in June have dwindled. Implying that the minor recovery in the gold price may be only a retreat that investors can utilize to sell.

Stubborn US PPI statistics revealed that inflationary pressures persisted.

The precious metal fell sharply on Thursday as the United States Producer Price Index (PPI) for February came in higher than predicted. . Fed policymakers have greatly reduced pricing pressures. But the last stretch to the 2% target appears to be more of a sticker than actual achievement. The likelihood of higher interest rates boosted the US Dollar (USD). Which weighed on the XAUUSD pair.

10-year US Treasury rates fell marginally to 4.28% on Friday. Although diminishing expectations of the Fed announcing rate reduction in June pushed them up to 4.30% this week from 4.03% previously. This has greatly raised the opportunity cost of holding investments in non yielding assets like gold. Meanwhile, the US Dollar Index (DXY) has risen to a three-week high above 103.50.

Daily Market Movers: Gold price rises to $2,170, ahead of US Michigan CSI report.

The yield on US Treasury bonds has fallen marginally. The broader attractiveness of gold remains uncertain. As investors rethink expectations for Federal Reserve rate cuts in the June policy meeting. Following the February US PPI report. Which showed that producers raised prices for goods and services faster than expected.
Market expectations for Fed rate reduction in June have dipped as hot PPI data suggests. That Fed policymakers should not rush to lower interest rates. According to the CME FedWatch tool, the chances of a rate cut have dropped to 59% from 74% a week ago.

Consumer price index (CPI) data also revealed that inflation remains persistent.

This week’s consumer price index (CPI) data also revealed that inflation remains persistent. Stubborn price pressures have put doubt on Fed Chair Jerome Powell’s comments in his Congressional speech.
that the central bank is close to developing confidence that inflation will return to the target rate of 2%
Aside from the US PPI, the US Census Bureau announced that retail sales in February recovered less than predicted. Retail sales increased by 0.6%, compared to investors’ expectations of 0.8% rise. In January, sales fell by 1.1%, down from the previously projected 0.8% fall.
Meanwhile, investors are diverting their attention to the Fed’s interest rate decision, which will be revealed on Wednesday. The Fed is widely expected to maintain interest rates unchanged in the 5.25%-5.50% range. The central bank will also issue economic forecasts and the dot plot, which will show Fed officials’ expectations for interest rates over time.
Prior to that, preliminary Michigan Consumer The Sentiment Index will be the focus, and it will be published at 14.00 GMT. Sentiment is expected to have held constant at 76.9. The data reflect people’s perceptions about economic prospects. Upbeat rates tend to reflect robust consumer spending, stronger economic growth, and a solid labor market, whilst dropping figures often indicate that individuals’ confidence in economic prospects is diminishing.