• Gold price drops as investors see no immediate escalation in Israel-Iran tensions.
• Fizzling Fed rate cut prospects combined with easing geopolitical fears weigh on Gold.
• Fed’s Goolsbee said progress in taming inflation has stalled.

Gold price (XAU/USD) dips vertically after failing to recapture the crucial resistance of $2,400 in Monday’s European session, driven by less safe-haven demand as Middle East tensions ease. 

No further escalation in tensions between Iran and Israel has provided some relief to dismal market sentiment. Also, markets are increasingly pricing out the possibility that the Federal Reserve (Fed) will lower interest rates in the June and July meetings, further weighing on Gold. 

10-year US Treasury yields rise to 4.66%. Yields on interest-bearish assets such as US bonds rise on firm prospects that the Fed could be a laggard in pivoting to rate cuts compared with other central banks from developed nations. Higher bond yields, in turn, weigh on non-yielding assets such as Gold as they become a less-attractive alternative to invest in. 

This week, the United States core Personal Consumption Expenditure Price Index (PCE) data for March will likely move bond yields and Gold prices.  As the Fed’s preferred inflation gauge, PCE data could shift expectations of when the US central bank will start lowering interest rates. According to the CME FedWatch tool, markets currently expect the Fed to make the move at its September meeting. 

Meanwhile, the US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, consolidates in a tight range around 106.00. Gold is a dollar-denominated asset, so a firm US Dollar tends to keep its price under control. 

Going forward, investors will focus on the preliminary Q1 Gross Domestic Product (GDP) data, which will be published on Thursday. The US economy is estimated to have expanded by 2.5%. Strong growth exhibits robust consumer spending and higher production, which translates into higher price pressures. Higher GDP numbers would allow the Fed to keep interest rates at the current high levels, which will eventually improve the US Dollar’s demand.