Gold Trading Reminder: Gold prices are falling due to the strengthening of the US dollar, and the Federal Reserve's decision is coming!

On Wednesday (March 20), at the beginning of the Asian market,Spot goldNarrow range oscillation, currently trading in 2157.80dollarGold prices fell slightly on Tuesday, spot gold closed down 0.13%, closing at $2157.40/ounce, the lowest intraday hit $2147.03/ounce, becauseUnited StatesThe start of single-family housing rebounded sharply in February, hitting the highest level in nearly two years, the dollar strengthened, and the market was concernedFederal ReserveInterest rate stance signals at the end of a two-day policy meeting.

(Daily chart of spot gold)

The dollar rose 0.2 percent on Tuesday after hitting a more than two-week high of 104.06 earlier in the session, making gold more expensive for overseas buyers. 

Depu CapitalcommodityRyan McKay, strategist, said: Gold's upward momentum has been somewhat drained by rapidly shifting positions over the past week or two and now taking a breather as expectations of a Federal Reserve rate cut have faded. "At the moment, we don't expect a rebound anytime soon. But at the same time, we expect a big sell-off as physical markets remain strong and bullish sentiment remains quite strong from a position perspective."

Gold prices hit a record high of $2194.99 on March 8, but fell nearly 1 percent last week after higher-than-expected U.S. consumer and producer price inflation in February dampened hopes of an early rate cut by the Federal Reserve, as inflation may remain high.

In terms of U.S. data, the U.S. Department of Commerce's Bureau of Statistics said that single-family housing starts, which account for the majority of residential construction, surged 11.6% in 2 months-on-month, at a seasonally adjusted annual rate of 1.129 million units, the highest since April 2022. January data was revised down to an annual rate of 1.012 million units, the previous value was 1.004 million units.

Housing starts for five or more housing projects rose 8.6% month-on-month, at an annual rate of 377,000 units. Overall housing starts rose 10.7% month-on-month in February, at an annual rate of 1.521 million units. Economists had forecast a rebound to 1.425 million units

Building permits for single-family homes rose 1.0% month-on-month in February, at an annual rate of 1.031 million units, the highest since May 2022. Building permits for multifamily projects rose 2.4% month-on-month, at an annual rate of 429,000 units. Building permits overall climbed 1.9%, at an annual rate of 1.518 million units.

Although the market generally expects the Federal Reserve to maintain interest rates unchanged on Wednesday, the market is awaiting comments from Federal Reserve Chairperson Jerome Powell after the meeting to obtain the latest interest rate expectations from the Federal Reserve.

According to CME "Fed Watch": The probability that the Fed will keep interest rates unchanged in the range of 5.25% -5.50% in March is 100%. The probability of keeping interest rates unchanged in May is 93.7%, and the probability of a cumulative 25 basis point cut is 6.3%. The probability of keeping interest rates unchanged in June is 40.9%, the probability of a cumulative 25 basis point cut is 55.6%, and the probability of a cumulative 50 basis point cut is 3.6%.

Harry Mamaysky, a professor at Columbia Business School and partner at QuantStreet Capital, said gold remains underallocated in investors' portfolios, and the Fed's upcoming easing cycle could make it a more attractive asset this year.

Strategists at Commerzbank analyzed the outlook for gold. They noted that the so-called "dot plot", the interest rate forecasts of individual FOMC members, are likely to attract particular attention at this week's Fed meeting. Recent US data has been mixed. Despite the rather disappointing economic data, price data suggest persistent inflationary pressures. Against this backdrop, we believe the Fed is unlikely to change their assessment, while the "dot plot" remains more or less unchanged. This could be positive for gold, as some market participants may expect interest rate expectations to rise following the release of US inflation data.