Gold price dips ahead of FOMC decision

XAU/USD trades at $2,292, down by over 1.50% on Tuesday. The US Bureau of Labour Statistics reported a jump in the Employment Cost Index (ECI) for April, and American consumer sentiment deteriorated further.

Gold prices dropped below the $2,300 threshold on Tuesday due to rising employment costs in the US, indicating persistent inflationary pressure. A stronger US Dollar and higher Treasury yields contribute to the decline, with traders anticipating a cautious Fed approach to rate adjustments.

The US economic calendar will remain busy, with traders focusing on the ISM Manufacturing PMI, the Fed’s monetary policy decision, and the US Nonfarm Payrolls report. Gold’s drop is courtesy of the jump in US Treasury bond yields and a soft US Dollar. The US 10-year Treasury bond yield has risen five basis points to 4.665%, a headwind for the golden metal.

The US Employment Cost Index (ECI) increased by 1.2% QoQ, exceeding forecasts of 1%, and the Fed will remain on its holding pattern as fears of inflation reaccelerating loom.