Gold trading with a negative bias for the sixth day in a row, with smaller Fed rate cut bets.
On Wednesday, the gold price (XAUUSD) remained under selling pressure for the sixth day in a row, although it managed to keep above a three-week low set the day before. Traders choose to remain on the sidelines ahead of the release of the FOMC meeting minutes, which, combined with US inflation data on Thursday and Friday, should provide clues regarding the Federal Reserve’s (Fed) rate-cutting course. This in turn will play a critical role in determining near-term US Dollar (USD) market dynamics and providing considerable impetus to the non-yielding yellow metal.
The prospect of a Hezbollah-Israel peace further undermines the safe-haven commodity.
USD Index (DXY), which tracks the US dollar against a basket of currencies, is hovering near a seven-week high set last Friday as chances on another big Fed rate cut in November fall. This, combined with reports of a potential ceasefire between Lebanon’s Hezbollah and Israel, appears to put downward pressure on the safe-haven gold price. The drop could also be linked to some technical selling following the previous day’s break through the $2,630 support level. Which mark the bottom boundary of a short-term trading range.
Daily Market Movers: Gold prices remain down on bets on lower Fed rates The cut underpins the USD.
The US Dollar remained at a multi-week high reached last Friday, as the likelihood of a more aggressive policy easing by the Federal Reserve faded, dragging the Gold price below the $2,630 critical support on Tuesday.
According to the CME Group’s FedWatch Tool, investors now expect the Fed to decrease interest rates by 25 basis points at its November meeting and by 50 basis points by the end of the year.
On Tuesday, New York Fed President John Williams stated that it will be acceptable to lower interest rates in the future, adding that September’s 50 basis point rate decrease should now be viewed as the norm.
Separately, Fed Governor Adriana Kugler stated that the approach to any policy decision will remain data-dependent, and that he will support more rate decreases if inflation progresses as projected.
Furthermore, Boston Fed President Susan Collins stated that while current monetary policy is helping to temper inflation, the US economy and labor markets continue to appear strong, and core inflation remains high.
Meanwhile, Fed Vice Chair Philip Jefferson stated that economic activity is still growing at a steady pace, but inflation has fallen significantly and the labor market has cooled from its formerly overheated position.
The yield on the benchmark 10-year US government bond remains above the 4% barrier, putting some pressure on non-yielding bullion for the Wednesday marked the sixth consecutive day.
On the geopolitical front, Iran-backed Hezbollah signaled on Tuesday that it would be open to a truce, but did not mention the end of the Gaza war as a requirement for putting an end to the conflict on the Lebanon-Israel border.
Traders are looking to the FOMC minutes for short-term momentum ahead of the US inflation data.
Investors are now looking to the September FOMC meeting minutes for clues regarding future rate cuts, ahead of the US consumer inflation statistics and the US Producer Price Index on Thursday and Friday, respectively.
