Gold slips on firmer dollar, spotlight on Fed meeting

Gold prices dipped on Monday (1 May) as the US dollar held firm, with cautious traders awaiting the Federal Reserve's interest rate hike decision later this week.

Spot gold XAU= was down 0.5% at $1,980.42 per ounce by 0531 GMT. US gold futures GCv1 fell 0.5% to $1,989.10.

The dollar index .DXY rose 0.2%, making greenback-priced bullion more expensive for overseas buyers.

The Federal Open Market Committee (FOMC) will meet on 2-3 May, and investors are largely expecting a 25 basis-point interest rate hike. FEDWATCH

"If the Fed comes out unexpectedly hawkish, then it won't bode well for gold. However, I don't think prices will fall below the $1,930 level," said Ilya Spivak, head of global macro at Tastylive.

Data on Friday highlighted that US consumer spending was unchanged in March, while underlying inflation pressures remained strong, which could see the US central bank raising interest rates again next month.

Bullion is known as an inflation hedge, but rising rates tend to dull a zero-yielding asset's appeal.

Gold prices rose more than 1% in April as renewed concerns over the US banking turmoil drove investors to the safe-haven asset.

"If we see a meaningful downturn in US economic data that expanded rate cut expectations for the back half of this year, then gold prices could climb above the $2,000 mark," Spivak added.

The European Central Bank is widely expected to raise rates for the seventh straight meeting on 4 May.

Top bullion consumer China's manufacturing activity unexpectedly shrank in April, official data showed on Sunday, raising pressure on policymakers seeking to boost an economy struggling for a post-COVID lift-off.

Among other precious metals, spot silver XAG= rose 0.1% to $25.06 per ounce while platinum XPT= lost 0.7% to $1,066.56.

Palladium XPD= inched 0.4% lower to $1,495.06.

Many Asian markets were closed on Monday for the Labour Day holiday.