GOLD PRICE FACES PRESSURE AS KEY CENTRAL BANK MEETINGS LOOM LARGE

• Gold price falls slightly as US yields remain firm due to diminished Fed rate cut expectations for June.
• The US Dollar remains subdued as upbeat China data improves risk appetite.
• This week, the Fed’s decision and guidance on interest rates will be keenly watched.

Gold price (XAU/USD) exhibits a subdued performance in Monday’s European session. Fading expectations for the Federal Reserve (Fed) reducing interest rates in the June policy meeting have strengthened yields on interest-bearing assets. 10-year US Treasury yields have extended their upside to 4.31%, up by 0.16%. Higher US bond yields have increased the opportunity cost of holding an investment in non-yielding assets such as Gold weighing on its price. 

The US Dollar Index (DXY) trades slightly lower at 103.40 due to improved risk appetite. The appeal for safe-haven assets has dampened due to the strong recovery in Chinese Retail Sales and Industrial Production data for February, which signals an improvement in domestic demand. This weaken appeal for safe havens has also built downside pressure on the Gold price.

This week, the Gold price will be guided by the Fed’s interest rate decision, which will be announced on Wednesday. The Fed is widely anticipated to keep interest rates unchanged in the range of 5.25%-5.50%. Therefore, the major focus will be on the interest rate guidance, which will be provided through the release of the so-called dot plot, a chart updated quarterly that shows interest rate projections from Fed officials for various timeframes.