Gold prices slide for first time in four weeks as Fed meeting nears; not much room for upside, say experts

Gold prices remained stable on Friday, poised to register their initial weekly decline in four weeks. Spot gold remained relatively steady at $2,159.26 per ounce. Bullion appeared to be on track for a weekly decline of 0.8%, marking its first such decrease since mid-February. This comes after reaching a record peak of $2,194.99 per ounce the previous week.

Investor expectations of a U.S. interest rate cut in June were dampened following data throughout the week indicating rising price pressures. The pressure on gold stemmed from increasing concerns surrounding an upcoming Federal Reserve meeting next week. This apprehension was further fueled by stronger-than-anticipated signals of both consumer and producer inflation, marking the third consecutive month of such robust readings.

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Now, the prices of the yellow metal will now depend to next week’s Fed meeting, where there will be an updated dot plot, and the market is going into the meeting with expectations of a hawkish Fed, as reflected in rising bond yields and a rising dollar index.

“Apart from the inflation print the other data’s have been indicating a mixed picture of the U.S. economy with manufacturing/ services activity slowing down, unemployment rate ticking up to rising retail sales and lower unemployment claims – keeping sentiments subdued. The Fed fund futures traders have trimmed bets of rate cut in June to 63-64% as compared to above 75% last week. So, as we go into the week ahead… price momentum could remain volatile and if Fed officials still pitches for a rate cut later in the year, we could see the U.S. dollar and Treasury yields going down, benefiting gold and equities, however, any contra view would push the bullion down again,” Pranav Mer, Research (Commodity & Currency) BlinkX & JM Financial, told Livemint.

A relief rally for gold?

Gold prices fell after a hot U.S. inflation report dimmed prospects of the Federal Reserve cutting interest rates. “We expect a relief rally in bonds post-Fed, which will also support gold prices. However, considering the massive run-up of the last three weeks in gold, we don’t see significant upside in the near term, even if the Fed is more dovish than market expectations,” Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, told Livemint.

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Experts further says that the gold prices are likely to remain in an uptrend despite whatever is the outcome of Fed meeting. “We see prices facing immediate support around ₹65,000 and next at ₹63,400, while in dollar terms, support comes around $2115 and next at $2000, on the higher side a breach above the recent all-time high would trigger further buying and prices may test ₹67,200-67,800 in the near term,” Mer further added.

Gold to remain volatile

Apart for U.S. Fed meeting, the gold prices have remained supported by geo-political uncertainty from middle-east tensions due to Israel-Hamas war, the ongoing Russia-Ukraine tussle and central bank gold demand.

According to Rahul Kalantri, VP commodities at Mehta Equities Ltd, says that the gold is expected to be volatile ahead of Federal Reserve’s April meeting.

“We expect gold will be volatile ahead of the Federal Reserve’s April meeting but till that time it might be move in range of $2140-$2200, either side breakout of the range could give further $50 move towards that directions. In domestic, range could be ₹64900- ₹66100,” he said.

Kalantri further added, “However, Investors are also keeping an eye on growing geopolitical threats between Russia and Ukraine, as a top Ukrainian intelligence official stated that two border regions had become “active combat zones.”