In Tuesday's European trading session, the price of gold faced downward pressure, slipping to $2,150. The primary driver behind this decline is the robust performance of the US Dollar, which has weighed heavily on the precious metal. Despite its traditional safe-haven status, gold's appeal has waned amidst potential hawkish surprises that could be delivered during the Federal Reserve's forthcoming monetary policy decision and the release of the quarterly dot plot on Wednesday.

The technical picture indicates that the price lacks bullish pressure; however, there is no aggressive sell-off, and the price slowly drifts towards the short-term support level, which basically means the market is now in a state of indecision:

The prevailing market sentiment anticipates the Fed to maintain interest rates within the 5.25%-5.50% range for the fifth consecutive time. However, the shadow of uncertainty looms large over projections regarding future rate cuts. Investors are increasingly cautious amid speculation that the Fed might defer its rate-cut plans, with some even scaling back bets on an imminent reduction in interest rates, particularly around the anticipated timeline of June.

The movement in 10-year US Treasury yields has remained relatively subdued, currently standing at 4.30%, albeit maintaining a robust stance. This stability is rooted in expectations that the Fed's initial rate cut, previously forecasted for June, might be pushed further down the timeline. The recent surge in consumer and producer inflation data has further fueled doubts among investors regarding the likelihood of an impending policy shift in June or any further postponement thereof.

Federal funds rate futures pricing, a popular gauge of market sentiment, indicates a prevailing sentiment for the Fed to maintain interest rates at their current levels after the conclusion of the two-day meeting. All eyes are now on the quarterly dot plot, which delineates interest rate projections over time, offering crucial insights into the sentiments of Chair Jerome Powell and other key officials regarding rate-cut expectations for the year.

In December, the dot plot hinted at the possibility of three rate cuts in 2024. However, any revision or moderation of these projections in the forthcoming dot plot could exert substantial downward pressure on the price of gold.

The Pound Sterling sustained its downward trajectory for the fourth consecutive trading session on Tuesday. The GBP/USD pair recorded a fresh weekly low as investors turned risk-averse amid a pivotal week dominated by major central bank decisions, notably from the Federal Reserve and the Bank of England.

The pair subsequently managed to rebound from the major support line. The key selling target has been achieved and the pair could be primed for the U-turn and recovery:

With both central banks widely anticipated to maintain the status quo on interest rates, investor attention is primarily fixated on any hints or indications regarding future interest rate trajectories.

In the United Kingdom, all eyes are on the BoE's monetary policy statement, with investors keenly parsing through for clues on the timing of potential interest-rate adjustments. The significant decline in UK headline inflation from double-digit figures to 4% has largely been attributed to the BoE's prolonged maintenance of high-interest rates over the past two years. However, this policy stance has also contributed to a stark deceleration in economic growth, thereby fostering expectations for rate cuts, potentially as early as August.