Gold Trades Around the $2028.00 An Ounce In The Aftermath of FOMC Meetings Minutes Release
Key Takeaways:
- Gold came under fresh buying pressure on Wednesday during the Asian session and was supported by a combination of factors
- Uncertainty about the timing of the interest rate cuts weighs on the back and helps limit further XAU/USD losses
- The upside, however, seems limited as elevated U.S. treasury bond yields still support the U.S. dollar
- Rising geopolitical tensions continue to lend support to the dollar-denominated commodity
XAU/USD (Gold) price edged slightly higher on Thursday during the early-Asian session to trade around the $2028.00 region in the aftermath of the latest FOMC Meeting Minutes release. The precious commodity extends the overnight bounce from the vicinity of the $2020.257 level and trades within striking distance of a two-week high/$2032.344 level.
Uncertainty about the timing of the interest rate cuts is a key factor that triggered some short selling around the U.S. dollar at high levels and, in turn, helped limit further losses around the dollar-denominated commodity. The risk-on impulse and a softer tone around the U.S. equity markets also acted as a tailwind to the non-yielding bullion.
A fresh leg down in U.S. Treasury bond yields amid uncertainty about the outlook for monetary policy helped revive the U.S. dollar supply. It became a key factor that helped limit further losses around the dollar-denominated commodity. Apart from this, the upside, however, seems limited as the U.S. dollar is still supported by elevated U.S. treasury bond yields, which suggests the current price action runs chances of fizzling out sooner or later and the path of least resistance for the XAU/USD pair is to the upside.
Markets seem convinced that the Fed will leave rates unchanged during the March and May meetings and start cutting rates during the third quarter of 2024 after
the January FOMC Meeting minutes released on Wednesday showed the Fed is concerned about cutting rates too soon, signalling early rate cuts were entirely off the table.
“In discussing the policy outlook, participants judged that the policy rate was likely at its peak for this tightening cycle,” the minutes stated. But, “Participants generally noted that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2 percent.”
The January FOMC Meeting minutes come days after a U.S. Bureau of Labor Statistics (BLS) report showed consumer and wholesale inflation rose in the U.S. in January when combined with robust U.S. job data and the recent hawkish Fed comments, fully debunks the idea of early aggressive rate cuts and supports the view that rates are likely to stay higher for longer.
That said, despite the combination of supportive factors, rising geopolitical tensions continue to lend support to the dollar-denominated commodity, and any further escalation of the conflicts in the Middle East would help raise gold prices.
In the future, investors look forward to the U.S. docket featuring the release of the Initial Jobless Claims (previous week), Manufacturing PMI (Feb), Services PMI (Feb) and the Existing Home Sales (Jan) data report.
Technical Outlook: Four-Hour Gold Price Chart
From a technical standpoint, the metal’s ability to capitalize on the move and acceptance above the very important 200-day (brown) Exponential Moving Average (EMA) at the $2024.28 level favours buyers and supports the case for further upside moves. Some follow-through buying would uplift spot prices toward the 2031.683 level, which would act as a barrier limiting further upticks. However, if the price pierces this barrier and finds acceptance above the weekly high at the $2032.344 level, buying interest could gain further momentum, paving the way for a rise toward the $2038.424 ceiling, and in highly bullish cases, gold could extend a neck up toward the $2040.00 mark followed by the $2044.613 crucial resistance level.
On the flip side, if dip-sellers and tactical traders return and catalyze a bearish reversal, initial support comes in at the $2024.28 level. Sustained weakness below this level would negate the near-term bullish outlook, paving the way for aggressive technical selling around the XAU/USD pair. Gold could then accelerate the drop toward the pivot level (P) at $2015.298. A Convincing move below this level, followed by a bearish price breakout below the lower limit of the multi-week ascending channel, would turn gold vulnerable for a drop toward the $2006.417 level, followed by the $2001.527 level and, in highly bearish cases, gold could fall toward the $1984.192 level.