Safe-haven gold prices traded below $4,600 as the market took a cautious approach ahead of the FOMC interest rate meeting scheduled for early Thursday morning.
At 9 am, gold prices were trading at $4,579, down 0.36% since it opened early Wednesday in the Asian session.
The Federal Reserve (Fed) policy decision is the main catalyst for the market over the next 24 hours. The federal funds rate is expected to be maintained at 3.50% to 3.75%.
Market attention is now focused on Chairman Jerome Powell's tone, particularly in assessing the strength of inflation as energy price pressures rise again.
This situation is driven by the Iran conflict and disruptions in the strategic Strait of Hormuz route, which directly affect global crude oil prices.
Any aggressive stance from the Fed has the potential to push up US Treasury yields and strengthen the US Dollar. This scenario would normally put pressure on gold prices.
Conversely, if the Fed signals a more cautious approach following the energy cost shock, it could provide some relief to the gold market.
In addition to the Fed decision, the market is also awaiting some important US economic data. On Thursday, first-quarter Gross Domestic Product (GDP) data is expected to increase to 2.3% annually, compared to 0.5% previously.
At the same time, the Personal Consumption Expenditures (PCE) Price Index for March is also in the spotlight, with core PCE projected at 3.2% annually compared to 3.0% previously. This data is important because it is the Fed's preferred measure of inflation.
Towards the end of the week, the Institute for Supply Management's manufacturing Purchasing Managers' Index (PMI) will complete the main data series.
The prices paid sub-index is expected to approach 80, well above the expansion threshold of 50, thus reflecting still-high cost pressures in the manufacturing sector.
The combination of stronger economic growth and persistent inflationary pressures has the potential to further strengthen the US dollar. At the same time, this situation is expected to continue to put pressure on gold prices throughout the week.
