Gold prices continue to slide on Tuesday, as the base metal has shed 1.4% so far this week. In North American trade, the spot price for an ounce of gold is $1304.85, down 0.82% on the day. On the release front, the ISM Manufacturing PMI also disappointed, dropping to 57.3 points. This was short of the forecast of 58.4 points. On Wednesday, market attention shifts to US employment indicators in the latter part of the week, starting with ADP Nonfarm Employment Change. As well, the Federal Reserve will release a rate statement.
The US dollar continues to gain ground, and that has been bad news for gold prices. Gold has plunged 3.4% since April 16 and is likely to fall below the symbolic $1300 level, for the first time since late December. There are a number of factors weighing on gold prices. Investor risk appetite remains strong, as tensions in the Korean peninsula have dropped rapidly. The leaders of North and South Korea met last week for a historic meeting, and US President Trump is scheduled to meet with North Korean leader Kim in the near future. On the domestic front, the US economy continues to perform well and inflation is moving higher. This has raised expectations that the Federal Reserve will raise rates four times in 2018, which is bullish for the US dollar.
The markets are keeping a close eye on the Federal Reserve, which winds up its monthly policy meeting on Wednesday. The Fed is expected to maintain the benchmark rate at a range between 1.50% and 1.75%, and analysts will be keeping a close eye on the rate statement – a hawkish statement could propel the US dollar to higher levels. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers have not changed their forecast of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the dollar should continue to perform well against the euro and other major currencies.