Southbound Ahead Of FOMC

Gold sits ~$6/oz worse off at typing to print ~$1,862/oz, operating around session lows and extending a pullback from Tuesday’s best levels.

• To recap Tuesday’s price action, the precious metal’s rebound from 11-week lows ($1,850.5/oz) was blunted as initial tailwinds from a retreat in U.S. real yields and the USD (DXY) unwound later in the NY session, ultimately seeing gold top out at $1,878.1/oz before paring gains.
• Looking ahead, Apr ADP Employment Change (BBG median +385K, +431K Mar), crosses at 1215 GMT, ahead of Fed Chair Powell’s May FOMC presser at 1830 GMT. While the Fed is widely expected to announce QT and a 50bp hike for May, some focus will likely be on potential shifts in language surrounding the possibility of larger rate hikes further into ‘22.
• May FOMC dated OIS currently point to back-to-back 50bp rate hikes for the May and June meetings, with a ~40% chance of a 75bp move for June now priced in.
• From a technical perspective, gold has broken support at $1,854.7/oz (May 2 low), exposing further support at $1,848.8 (76.4% retracement of Jan28-Mar8 rally) and $1,821.1/oz (Feb 11 low). Resistance is seen some distance away at $1,900/oz (May 2 high).