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.

Daily Digest Market Movers: Gold price is pressured by hawkish Fed expectations, bears seem non-committed

• Data released last week from the US pointed to some stickiness in inflation and might force the Federal Reserve to keep rates elevated, which, in turn, is seen weighing on the non-yielding Gold price.
• The University of Michigan's preliminary survey showed on Friday that one-year and five-year inflation expectations were little changed in March, while the US Consumer Sentiment Index eased to 76.5.
• The CME Group’s FedWatch Tool, meanwhile, indicates that the possibility of an interest rate cut at the June policy meeting stands at around 60% and holds back the USD bulls from placing fresh bets.
• Geopolitical risks remain elevated on the back of the protracted Russia-Ukraine war and conflicts in the Middle East, which is seen lending additional support to the perceived safe-haven precious metal.
• Ukraine last week stepped up drone strikes on Russian oil refineries, while Israeli Prime Minister Benjamin Netanyahu confirmed that he will proceed with plans to push into Gaza's Rafah enclave.
• Traders might refrain from placing aggressive directional bets and now look forward to the outcome of the highly anticipated FOMC monetary policy meeting on Wednesday for some meaningful impetus.

Technical Analysis: Gold price could slide further once the $2,145-2,144 horizontal support is broken

From a technical perspective, any further decline is likely to find some support near the $2,145-2,144 region, below which the Gold price could accelerate the fall to the next relevant support near the $2,128-2,127 zone. The corrective slide could extend further towards the $2,100 round figure, which should act as a strong base for the XAU/USD.

On the flip side, the $2,175-2,176 region now seems to have emerged as an immediate strong barrier, which if cleared should allow the Gold price to challenge the record peak, around the $2,195 area touched last week. Some follow-through buying beyond the $2,200 mark will set the stage for the resumption of the uptrend witnessed since the beginning of this month.