Lower As Fed’s Focus On Neutral Rates In View

Gold is $7/oz weaker, operating around session lows to print $1,924/oz at typing. The precious metal has hit its lowest levels in over two-weeks in Asia-Pac dealing, on track to close lower for a fourth session in five after coming to within a whisker of $2,000/oz on Apr 18 (at $1,998.4/oz).

• The move lower comes despite a broad downtick in nominal U.S. Tsy yields, with pressure from increasingly hawkish Fed expectations evident. On that front, May FOMC dated OIS point to ~55bp of tightening priced in for that meeting, suggesting a ~20% chance of a 75bp hike despite Cleveland Fed President Mester (‘24 voter) last Friday voicing opposition to such a move throughout calendar ‘22, emphasising the need for a “methodical approach” to hiking rates.
• To recap, Fed messaging leading up to the pre-FOMC blackout period has coalesced around a series of 50bp rate hikes to “neutral” levels (seen as around 2.5% by some Fed officials), led by remarks from Fed Chair Powell on Thursday indicating support for a 50bp hike in the May FOMC.
• From a technical perspective, gold has broken below its 50-Day EMA, exposing key support at $1,890.2/oz (Mar 29 low).