Holding Above $2000 As US Economic Outlook Softens, Focus On Fed

Gold has held onto Tuesday’s gains during APAC trading on Wednesday and is holding above $2000/oz. It rose 1.7% yesterday on safe haven flows reaching a peak of $2019.44 and is currently trading around $2017.05/oz down off the intraday high of $2019.53, highest since mid-April, ahead of today’s Fed meeting. The USD index is 0.15% lower.

• It is generally expected that the Fed will hike rates 25bp today but that it could signal that it is about to pause (see MNI Fed Preview: May 2023). A dovish statement is likely to support gold prices, as the yellow metal is non-yield bearing and should rally on lower rate expectations and Treasury yields. This week’s gold rally has opened up the bull trigger of $2048.70, the April 13 high.
• Bullion has been boosted by not only the upcoming FOMC decision but also weaker risk appetite, geopolitical tensions, the US debt ceiling impasse and disappointing US job opening data suggesting slower growth plus this week’s bank rescue.
• April US ADP employment is released, which should give some direction for Friday’s employment data. It is expected to rise 148k after 145k last month. There is also the services PMI and non-manufacturing ISM for April. The Fed announcement will follow after the data.