Gold stalls around $2,150 ahead of Fed decision

• Gold is flatlined as investors await Federal Reserve's monetary policy announcement.
• US 10-year Treasury yield dip reflects market caution before Fed's interest rate decision and economic outlook.
• A potential upward adjustment in Fed's Dot Plot may hint at hawkish shift, a headwind for Gold’s price.

Gold price is virtually unchanged ahead of the US Federal Reserve’s monetary policy decision as traders remain on the sidelines. In addition to delivering the statement, Fed officials will update their economic projections, with investors eyeing a tweak to the Dot Plot, which could pave the way for a US Dollar comeback. The XAU/USD trades near $2,150.00, almost flat.

An hour before the Fed’s meeting, the US 10-year Treasury note yields 4.281%, down one basis point, as market participants remained uncertain. The US Dollar Index (DXY), a gauge of the buck’s value against a basket of six other currencies, rose 0.12% to 103.94, putting a lid on Bullion’s advance.

Financial market chatter suggests that if two Fed Dot Plot projections adjust to the upside in 2024, it would be perceived as a “hawkish tilt;” therefore, further XAU/USD downside is expected. On the other hand, there’s some speculation that policymakers could adjust their monetary policy expectations for 2025, suggesting the Federal Funds Rate (FFR) would be higher than December’s 3.6% estimate.

Daily digest market movers: Gold stays firm amid strong US Dollar

• The Federal Reserve’s Summary of Economic Projections in December showed that policymakers expected GDP in 2024 to be at 1.4% and the Unemployment Rate to be at 4.1%.
• Regarding inflation figures, the Core Personal Consumption Expenditure (PCE) Price Index, favored by Fed Chair Jerome Powell for tracking inflation, is predicted to fall to 2.4% in 2024, aligning with the general PCE forecast.
• December’s Dot Plot suggested that Fed officials were expecting the FFR to end at 4.6%, down from 5.1%. However, if the median moves to 4.8%, that would imply Powell and company are expecting two rate cuts for 2024.
• The latest US economic data witnessed mixed business activity readings, making it challenging to predict the pace of economic deceleration in the US. The labor market has shown signs of cooling, though the economy added more people to the workforce than expected, while fewer people applied for unemployment benefits.
• Recent inflation data in the US showed that inflation on the consumer and producer side surprised to the upside, suggesting that inflation is stickier than expected.
• Given the backdrop, Fed Chair Jerome Powell’s testimony at the US Congress earlier this month, suggesting the Fed would begin to cut borrowing costs, were justified. However, last week’s inflation figures and Retail Sales data triggered a repricing of Fed rate cut bets, aligning with the US central bank's view of 75 basis points of easing toward the end of 2024.
• According to the CME FedWatch Tool, expectations for a June rate cut stand at 64%, down from 72% a week ago.

Technical analysis: Gold traders remain on the sidelines as XAU/USD stays around $2,150

XAU/USD price hovers around $2,150 unmoved ahead of the FOMC decision. A dovish tilt could open the door for a rally that prompts a jump in Gold prices, opening the door to challenge the all-time high (ATH) at $2,195.15. A retest there would expose $2,200 next.

On the other hand, if Gold spot price tumbles below $2,150, look for a breach below December’s 3 high, exposing the March 6 low of $2,123.80, followed by $2,100.