- Gold price falls sharply, below the crucial support of $2,285, on expectations that the Federal Reserve will maintain a hawkish guidance on interest rates in its monetary policy meeting after keeping interest rates steady in the range of 5.25%-5.50% for the sixth straight time.
- A slew of hotter-than-expected inflation readings so far this year indicate that the disinflation process has stalled. It suggests that the Fed should keep interest rates high for a longer period until policymakers gain confidence that price pressures will sustainably return to the desired rate of 2%.
- Prospects of interest rates remaining higher bode poorly for Gold as it increases the opportunity cost of holding an investment in it. Meanwhile, investors are keen to know about rate-cut timing and the current status of the Fed’s three rate-cut projections, indicated by March’s dot plot. The CME FedWatch tool shows that traders see the Fed begin reducing interest rates from the September meeting.
- In Wednesday’s session, before the Fed’s interest rate decision, ADP Employment Change and the ISM Manufacturing PMI data for April will be published in the early New York session. Economists have forecasted that fresh US private payrolls increased by 175K, slightly lower than the prior advance of 184K. The Manufacturing PMI is estimated to have dropped to 50.0 from 50.3 in March.
- From the Manufacturing PMI report, investors will keenly focus on the New Orders subcomponent. The preliminary PMI survey by S&P Global for April reported that output growth cooled in line with demand weakness as new orders decreased for the first time in six months, albeit dropping only modestly. Falling new business was signalled among manufacturers and service providers alike. Upbeat employment and factory data would improve the US economic outlook, while weak numbers will deepen concerns over a slowdown.
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