Bullion prices have continued their bearish streak below $4,700 since last week as the broader market remains cautious ahead of the Federal Reserve's (Fed) key interest rate decision meeting and further developments in the Middle East conflict.
At 9.10 am, gold prices were trading at $4,690, up 0.18% since it opened early Tuesday in Asian trading.
The Federal Open Market Committee (FOMC) is expected to maintain the benchmark overnight interest rate in the 3.50%–3.75% range, a level that has not changed since December.
The market's main focus is now shifting to Fed Chairman Jerome Powell's press conference, which could potentially provide clues on the direction of monetary policy towards the end of the year.
Any aggressive tone from the Fed is expected to support a strengthening US dollar (USD), thus putting pressure on commodity prices denominated in the currency. These include gold and oil, which are typically sensitive to changes in interest rates and dollar movements.
At the same time, questions about Powell's position on the Fed Board of Governors have also been raised. Uncertainty has arisen following the possible appointment of Kevin Warsh, which is seen as having the potential to influence the direction of the next policy meeting in June.
From a geopolitical perspective, ongoing tensions between the United States and Iran, including the closure of the Strait of Hormuz, continue to push crude oil prices higher.
This situation has increased global inflationary pressures and thus made it difficult to ease monetary policy in the near future.
Although gold is often a hedge asset during geopolitical uncertainties, a high interest rate environment reduces its appeal because the precious metal does not offer interest returns.
According to a CNBC report, US President Donald Trump and his national security team are evaluating Iran's proposal to reopen the Strait of Hormuz on the condition that economic sanctions are lifted and the conflict ends.
The proposal also involves postponing negotiations regarding Tehran's nuclear program to another date.
However, the direction of the negotiations is still uncertain and it is not yet certain whether Washington will accept the offer to end the conflict that has lasted for almost two months.
