Oil price plunge eases inflation concerns and weighs on the US dollar, with markets focusing on the Federal Reserve meeting and inflation data

(1) ING analysts Warren Patterson and Ewa Manthey noted that the sharp drop in oil prices on Monday eased market concerns over inflation and further monetary tightening, while putting pressure on the US dollar and US Treasury yields, thereby driving gold prices higher. This move followed the pause in hostilities between the US and Iran.(2) Lower oil prices have improved the outlook for the non-yielding asset, gold. The market is currently focused on the Federal Reserve meeting and the soon-to-be-released US inflation data to seek further guidance on interest rate prospects.(3) Analysts believe that if yields remain suppressed, gold prices should continue to be supported around the current levels; however, any hawkish surprise from the Federal Reserve could limit gold's upward momentum in the near term.