Gold oscillates in a range and impacted by a variety of diverging influences.
The gold price (XAUUSD) attracts new sellers as the European session begins on Tuesday, and it appears to have paused the overnight moderate rebound move from the $2,145 zone, or more than a one-week low.
Expectations for a hawkish Fed, higher US bond rates, and a bullish USD put pressure on the dollar.
Expectations that the Federal Reserve (Fed) will maintain its higher-for-longer interest rate narrative in the face of persistently high inflation in the United States continue to sustain elevated US Treasury bond yields. This, in turn, boosts the US dollar (USD). reached a nearly two-week high, and is viewed as a major element eroding the non yielding yellow metal.
Meanwhile, markets continue to price in the potential that the Fed would begin its rate-cutting cycle as early as June. This, combined with continued global concerns, may provide some support for the safe-haven gold market and help limit losses. Traders may also avoid from taking aggressive directional bets ahead of the key two-day FOMC policy meeting, which begins this Tuesday. Investors will be looking for clues about the Fed’s rate-cutting plan, which will play a critical role in fueling USD demand and providing considerable impetus to the precious metal.
Daily Market Movers: Gold price falls as lowered Fed rate drop bets raise USD to Two-week high.
The better US inflation figures fueled expectations that the Federal Reserve will keep interest rates high, which failed to help the non-yielding gold price build on Monday’s rebound from more than a week low.
Markets now predict less than three 25 basis point rate cuts this year, with a 51% chance that the Fed will begin the rate-cutting cycle at the June meeting, a substantial drop from forecasts at the beginning of the year.
Expectations that the Fed will continue to the higher-for-longer interest rate storyline have pushed the yield on the benchmark 10-year US government bond to a three-week high, supporting the US dollar and capping the commodities.
The prolonged Russia-Ukraine war, along with the upheaval in the Middle East, , may continue to provide some support to the safe-haven XAUUSD and assist limit further losses ahead of the critical FOMC meeting beginning today.
Geopolitical concerns may provide support for the XAUUSD ahead of the FOMC meeting.
Last week, Ukraine increased drone assaults on Russian oil refineries, while Israeli Prime Minister Benjamin Netanyahu announced plans to enter Gaza’s Rafah pocket, adding to the sense of unease.
Meanwhile, the attention will be on whether Fed policymakers adjust their economic estimates and rate decreases for this year and the next two years, which will decide the XAUUSD’s near-term trend.
