Gold prices rebounded slightly in early trading in the Asia-Pacific region. The weakness of the dollar seems to support precious metals. In fact, the two show a strong negative correlation in history. Ahead of Thursday's FOMC meeting, the DXY dollar index fell to an eight-week low of 90.75 as investors expected the Fed to adopt dovish policies to support the recovery.

As the yield on the 10-year Treasury note rose slightly to 1.563%, the rebound in gold prices was modest. Stronger-than-expected PMI data for new home sales and manufacturing in the US, as well as strong corporate earnings, boosted inflationary hopes. Higher long-term interest rates put pressure on gold prices as the opportunity cost of holding gold increased.

Deteriorating virus conditions in Japan and India appear to have dampened growth prospects, boosting demand for risk aversion. The Japanese government has announced a third round of emergency measures in Tokyo, Osaka and two other prefectures in an attempt to stop the surge in coronavirus cases. The measures, which began on Sunday and will last at least until May 11, cast a shadow over the upcoming Tokyo Olympic Games. India has reported a daily increase in new coronavirus infections, with an increase of 349691 in the past 24 hours. Prime Minister Narendra Modi urged all citizens to be vaccinated and cautious, saying the infection "storm" shook the country. Investors in the Asia-Pacific region are deeply concerned about the virus epidemic in India, which could affect the prospects for recovery and reopening in the region. Against this backdrop, rising demand for safe haven is likely to boost gold prices as a new wave of uncertainty emerges.

As the Federal Open Market Committee (FOMC) released the latest summary of economic forecasts at its March meeting, gold prices are likely to continue to benefit from the recent weakness in longer-term Treasury yields, as the committee appears to be on a predetermined path. Looking ahead, interest rate decisions from FOMC and the Bank of Japan, as well as a series of GDP data from the United States and Europe, are likely to be closely watched by gold traders this week. Although the conditions for the Fed to consider raising interest rates are far from being met, the improvement in fundamental indicators may indicate that its asset purchase programme will accelerate the pace of tightening. A more hawkish Fed could derail gold's upward trajectory. If the central bank remains dovish on the monetary outlook, the opposite is true.

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