The price of gold fell by another 0.25% after it collapsed by 2.32% yesterday amid a rally in the US currency and a decrease in demand for safe haven assets. At the same time, investors are being cautious ahead of the announcement of the results of the Fed meeting.
Experts expect the Fed to keep the interest rate at the same level (5.25%-5.5%), but if Central Bank Governor Powell sticks to a hawkish tone, the fall in gold prices may accelerate. Powell said in mid-April that monetary policy needs to be restrictive for longer. Gold is known as an inflation hedge but elevated interest rates reduce the appeal of holding the non-yielding asset.
Overall, a number of stronger-than-expected data led investors to reconsider their expectations regarding the timing and extent of the Fed's monetary policy easing. Traders now expect a rate cut of only 29 basis points by December, compared with more than 170 basis points at the beginning of the year. Expectations that rates will remain high for a long time have sharply increased US bond yields, making them more attractive and strengthening the dollar. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.15% to 106.39, reaching its highest level since April 16.