Treads Water As Market Considers Next Week’s FOMC Outcome

Gold is unchanged in the Asia-Pacific session, after treading water on Tuesday. The precious metal closed +0.1% at 1963.52 as the US tsy yield curve twist flattened and the market considered the Federal Reserve’s interest rate path, ahead of next week’s FOMC meeting.

• Traders have shown a growing inclination towards the belief that the US central bank will maintain interest rates at their current level at the upcoming June meeting while remaining open to the possibility of future rate hikes. The pricing of FOMC-dated OIS contracts has an expectation of approximately 6bp of rate hikes factored in for next week's meeting, with a projected terminal rate of around 5.25% by July. Additionally, the market has priced in approximately 25bp of rate cuts for 2023.
• In a quiet day data-wise, tsys were pressured to session lows on spillover from EGBs, rate locking tied to incoming corporate debt issuance early in the NY session. Higher US tsy yields are typically negative for non-yielding bullion.
• However, cash tsys finished the NY session 1bp cheaper to 4bps richer across the major benchmarks with the curve twist flattening, pivoting on 3s.