Gold Price Forecast: XAU/USD Rebounds Above $2,280, Breaking Two-Day Losing Streak ahead of Fed Rate Decision

On Wednesday, during the Asian trading session, the price of gold, also known as XAU/USD, saw slight increases, reaching around $2,288. This uptick comes as investors adopt a cautious stance in anticipation of the Federal Reserve’s monetary policy meeting scheduled for Wednesday. Additionally, market attention is drawn to the release of the US ISM Manufacturing PMI and ADP Employment Change data later in the day.

At the same time, the US Dollar Index (DXY), which measures the value of the US dollar against a selection of other currencies, has risen to its highest level for the week, reaching 106.40. On the flip side, US Treasury bond yields have dipped slightly, with the 10-year yield dropping to 4.67%.

The US Federal Reserve is likely to keep interest rates the same during its May meeting on Wednesday and stick to its cautious approach. Expectations for the Fed to lower interest rates have been pushed back, with the chance of a rate cut in June dropping to about 10% and the likelihood of cuts in September falling below 75%, according to the CME FedWatch tool. Investors will pay close attention to the Press Conference following the Fed meeting. If the Fed continues to show a cautious stance, it could strengthen the US dollar and make non-interest-bearing metals like gold less attractive.

On the other hand, China, the world’s largest consumer of gold, has been steadily buying gold since October 2022, making it the longest streak of gold accumulation since at least 2000. This buying trend from China could further increase the value of gold.

Additionally, China’s significant and continuous purchases of gold by its central bank are raising concerns that the government might not only be bolstering its currency but also preparing for a potential large-scale invasion of Taiwan, as reported by The Telegraph on Tuesday. This news has caught the attention of gold traders, who are keeping a close watch on the situation between China and Taiwan, as well as other geopolitical tensions in the Middle East. Any increase in tension could lead to a rise in demand for safe-haven assets, such as gold, which could positively impact its price.

XAU/USD