Gold prices fell late in the North American session on Tuesday amid a strong US Dollar but despite falling US Treasury bond yields.

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Market participants await the US Federal Reserve’s monetary policy announcement later today, followed by a press conference by Fed Chair Jerome Powell. Meanwhile, XAU/USD prices are set to remain near $2,150 as traders remain uncommitted to posting fresh bets in favor or against the yellow metal.

The non-yielding metal remains subdued as traders await the Federal Open Market Committee (FOMC) decision. In addition to delivering its monetary policy statement, policymakers are expected to update their projections about the United States economy. Growing concerns that the Fed will reduce its estimates for the Federal Funds Rate (FFR) keep traders on edge.

Daily digest market movers: Gold holds to modest gains as US yields drop

• Tuesday’s US economic docket featured the release of Building Permits in February, which rose by 1.9% MoM from 1.489 million to 1.496 million. Meanwhile, Housing Starts for the same period saw a significant increase of 10.7%, surpassing the expected 8.2%.
• The US 10-year Treasury bond yield has fallen two-and-a-half basis points to 4.296%.
• The latest US economic data witnessed mixed readings in business activity, making it challenging to predict the pace of economic deceleration in the US. The labor market has shown signs of cooling, though the economy added more people to the workforce than expected while fewer people applied for unemployment benefits.
• Recent inflation data in the US showed that inflation on the consumer and producer side surprised to the upside, suggesting that inflation is stickier than expected, failing to break below the 3% threshold.
• Given the backdrop, Fed Chair Jerome Powell’s testimony at the US Congress earlier this month, suggesting the Fed would begin to cut borrowing costs, were justified. However, last week’s inflation figures and Retail Sales data triggered a repricing of Fed rate cut bets, aligning with the US central bank's view of 75 basis points of easing toward the end of 2024.
• According to the CME FedWatch Tool, expectations for a June rate cut stand at 58%, down from 72% a week ago.

Technical analysis: Gold buyers take a breather below $2,170

XAU/USD price has stabilized ahead of the FOMC decision, sitting above the December 4 high of $2,146.79, the first support level. A dovish tilt by the Fed could pave the way for a recovery toward the March 8 high of $2,195.15, followed by the $2,200 mark.

On the other hand, if the gold spot price tumbles below $2,150, look for a breach below the December 3 high, exposing the March 6 low of $2,123.80, followed by $2,100.

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