Gold prices slipped earlier this week as the US dollar strengthened, and investors prepared for a series of policy decisions from major global central banks, including the Federal Reserve.
On Monday (March 18) at 10:30 AM WIB, spot gold prices fell by 0.4% to US$ 2,147.89 per troy ounce. Similarly, US gold futures dropped by 0.5% to US$ 2,151.3 per troy ounce.
"A fairly hawkish tone from the Fed has emerged... indicating a fairly strong consensus that there may only be one or two rate cuts this year," said Kyle Rodda, a market analyst at Capital.com.
The Fed is widely expected to maintain interest rates at 5.25%-5.5% at the end of its two-day meeting on Wednesday.
However, there's a possibility that the Fed will signal a higher policy outlook for a longer period given the persistently firm inflation both at the consumer and producer levels.
Traders are now estimating a 56% chance of a rate cut in June. Higher interest rates diminish the allure of holding non-yielding gold.
Last week, data showed that US consumer prices surged in February, and producer prices rose more than expected amid spikes in prices of goods such as gasoline and food.
"If we get a less hawkish outcome from the Fed, there's reason to expect we'll see a weaker dollar, lower yields, and that can only trigger a rally and provide a fundamental boost, and then we're looking at the US$ 2,200 level," Rodda said.
The US dollar held steady near a two-week high against its peers, making gold more expensive for holders of other currencies.
On the other hand, the Bank of Japan is expected to depart from its ultra-dovish monetary policy at the two-day meeting ending on Tuesday. The Bank of England will hold its meeting on Thursday and is expected to maintain its interest rates.
The anticipation of these central bank decisions, coupled with the dollar's strength, has influenced the trajectory of gold prices, prompting investors to closely monitor developments in the coming days.