Gold slips on firmer dollar, Fed meeting spotlight

• Dollar up 0.1%
• The Fed is likely to hike rates by 25 basis points on Wednesday

May 1 (Reuters) – Gold prices fell on Monday as the US dollar remained firm and traders positioned ahead of a long-awaited Federal Reserve rate hike decision due this week.

Spot gold was down 0.4% to $1,981.96 an ounce by 0254 GMT. US gold futures fell 0.4% to $1,991.70.

The dollar index rose 0.1%, making bullion more expensive for foreign buyers.

The Federal Open Market Committee (FOMC) is due to meet on May 2-3 and investors are largely expecting a 25 basis point rate hike.

“If the Fed comes out unexpectedly hawkish, it doesn’t bode well for gold. However, I don’t think prices will fall below $1,930,” said Ilya Spivak, Head of Global Macro at Tastylive.

Data on Friday showed that US consumer spending was flat in March while underlying inflationary pressures remained strong, which could prompt the US Federal Reserve to hike interest rates again next month.

Bullion is known as an inflation hedge, but rising interest rates tend to reduce the appeal of zero-interest investing.

Gold prices rose more than 1% in April as renewed worries about the US banking turmoil pushed investors into safe haven.

“If we see a meaningful decline in US economic data, raising expectations for rate cuts in the second half of this year, then gold prices could surge above $2,000,” added Spivak.

The European Central Bank is widely expected to hike interest rates for the seventh consecutive meeting on May 4th.

Manufacturing activity at China’s biggest precious metals consumer unexpectedly contracted in April, official data showed on Sunday, increasing pressure on policymakers trying to boost an economy struggling to get off to a post-COVID start.

Among other precious metals, spot silver fell 0.1% to $25.00 an ounce and platinum fell 0.7% to $1,066.74 an ounce.

Palladium was down 0.3% to $1,497.39.

Many Asian centers were closed Monday for the Labor Day holiday.

Reporting by Ashitha Shivaprasad in Bengaluru

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