Easing fears of a banking crisis act as a headwind

The recent news that UBS will rescue Credit Suisse in a $3.24 billion deal helped calm nerves about the contagion risk and prompted investors to cautiously return to riskier assets. This led to a strong two-day rally in the equity markets, which, in turn, resulted in receding demand for traditional safe-haven assets and should as a headwind for Gold price. Moreover, easing fears of a full-blown banking crisis lifts expectations that the Fed will continue its fight against inflation. In fact, the markets are still pricing in a 25 bps rate hike at the end of a two-day Federal Open Market Committee (FOMC) meeting later this Wednesday.

Bets for more rate hikes by major central banks to cap gains

Furthermore, the stronger consumer inflation figures from the United Kingdom (UK) released this Wednesday add pressure on the Bank of England (BoE) to hike by 25 bps at the very least on Thursday. This, along with the prospects for additional jumbo rate hikes by the European Central Bank (ECB), should cap the non-yielding Gold price. This makes it prudent to wait for a strong follow-through buying before positioning for any further appreciating move. Traders might also prefer to wait for fresh clues about the Fed's future rate-hike path, which will determine the next leg of a directional move for Gold price.

Hence, the market focus will remain glued to the FOMC monetary policy statement and the updated economic projections, especially the dot plot. Apart from this, investors will closely scrutinize Fed Chair Jerome Powell's remarks at the post-meeting press conference, which will play a key role in influencing the near-term USD price dynamics. and provide some meaningful impetus to Gold price.