Gold price edges lower for second day on bleak interest-rate outlook

Source Fxstreet
  • Gold price retreats for the second consecutive day on the back of elevated interest-rate expectations. 
  • Fed policymakers are expressing a reluctance to lower interest rates until more progress has been made on beating inflation. 
  • Their views are echoed in other parts of the globe further weighing on the Gold price which is sensitive to interest rates. 

Gold price (XAU/USD) trades lower by about a quarter of a percent in the $2,410s on Wednesday as a shift in the outlook for interest rates – both in the US and globally – weighs on the precious metal. 

Recent comments from US Federal Reserve (Fed) policymakers repeated the mantra that insufficient progress had been made in bringing inflation down to the Fed’s 2.0% target to warrant a lowering of interest rates. 

Their views weighed on the Gold price which, as a non-yielding asset, tends to perform poorly when interest rates are high due to the increased opportunity cost of holding Gold.

Gold price pulls back ahead of Fed Minutes  

Gold price might be further impacted when the Fed releases the Minutes of its latest policy meeting on Wednesday at 18:00 GMT. 

If the meeting minutes reflect a shift to a more hawkish stance amongst policymakers, Gold is expected to continue retreating. 

The recent Reserve Bank of Australia (RBA) meeting Minutes revealed that officials at the RBA had discussed the possibility of raising rates – a notable shift in stance from previous meetings. 

Technical Analysis: Gold price edges lower towards trendline support

Gold price (XAU/USD) edges down towards support from the green trendline, which reflects the short-term uptrend that began at the beginning of May.

The pair formed a Shooting Star Japanese candlestick pattern (shaded rectangle on the chart) on Monday, followed by a bearish close the following day, providing additional confirmation. The pattern is indicative of short-term weakness.  

XAU/USD Daily Chart


 

If the pullback continues, Gold will probably fall to initial support at the green trendline at about $2,405. Further weakness could take it down to the dark grey upward-sloping trendline in the $2,360s. 

However, the precious metal’s short, medium and long-term trends are bullish, and given the old adage that “the trend is your friend”, the odds favor an eventual recovery after the correction. 

A break above the new $2,450 all-time high would likely continue the rally to the next target at the psychologically significant $2,500 level. 

Economic Indicator

FOMC Minutes

FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

Read more.

Next release: Wed May 22, 2024 18:00

Frequency: Irregular

Consensus: -

Previous: -

Source: Federal Reserve

Minutes of the Federal Open Market Committee (FOMC) is usually published three weeks after the day of the policy decision. Investors look for clues regarding the policy outlook in this publication alongside the vote split. A bullish tone is likely to provide a boost to the greenback while a dovish stance is seen as USD-negative. It needs to be noted that the market reaction to FOMC Minutes could be delayed as news outlets don’t have access to the publication before the release, unlike the FOMC’s Policy Statement.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Japanese Yen rallies to February 18 high as upbeat wage data and GDP lift BoJ hike betsThe USD/JPY pair declines for the second straight day – also marking the fourth day of a fall in the previous five – and sinks to its lowest level since February 18, around mid-153.00s during the Asian session on Tuesday.
Author  FXStreet
Sep 08, Tue
The USD/JPY pair declines for the second straight day – also marking the fourth day of a fall in the previous five – and sinks to its lowest level since February 18, around mid-153.00s during the Asian session on Tuesday.
placeholder
US dollar clings to nine-week lows near 98.4 as Brent nears $100 and the yen hits a seven-month high — five events to watch todayThe dollar is pinned near nine-week lows even after a blockbuster jobs report, as an oil spike toward $100, a surging yen and China's reflation data crowd the driver's seat. Five key events to watch today: Brent at $99.46, USD/JPY at 154, China CPI/PPI, PBOC gold buying, and Thursday's PPI / Friday's CPI ahead of the September 15-16 FOMC.
Author  Eric Nkando
Sep 09, Wed
The dollar is pinned near nine-week lows even after a blockbuster jobs report, as an oil spike toward $100, a surging yen and China's reflation data crowd the driver's seat. Five key events to watch today: Brent at $99.46, USD/JPY at 154, China CPI/PPI, PBOC gold buying, and Thursday's PPI / Friday's CPI ahead of the September 15-16 FOMC.
placeholder
Brent holds above $100 as tanker attacks tighten supply — but four forces are capping the rallyBrent crude is holding above $100 a barrel for a second session, its first close above the level since late July, as tanker attacks near the Strait of Hormuz squeeze an already tight physical market. Yet the rally has been gradual: 8.3 mb/d of Gulf output is still shut in, diesel is at a record, and forecasts now range from $74 to $100.
Author  Irene Q.
Sep 10, Thu
Brent crude is holding above $100 a barrel for a second session, its first close above the level since late July, as tanker attacks near the Strait of Hormuz squeeze an already tight physical market. Yet the rally has been gradual: 8.3 mb/d of Gulf output is still shut in, diesel is at a record, and forecasts now range from $74 to $100.
placeholder
US August CPI lands tonight: after a 5.4% PPI shock, will the Fed hike on September 16?US August PPI came in at 5.4% year-on-year, above the 5.3% consensus, with core PPI at 4.6%. Traders have pushed the odds of a 25bp Fed hike on September 15-16 to around 70%. Tonight's CPI is the last major inflation print before the decision — here is the full calendar, the consensus numbers, and what a hot versus cool reading would mean for the dollar, yields, gold and stocks.
Author  Irene Q.
Sep 11, Fri
US August PPI came in at 5.4% year-on-year, above the 5.3% consensus, with core PPI at 4.6%. Traders have pushed the odds of a 25bp Fed hike on September 15-16 to around 70%. Tonight's CPI is the last major inflation print before the decision — here is the full calendar, the consensus numbers, and what a hot versus cool reading would mean for the dollar, yields, gold and stocks.
placeholder
Gold Price Forecast: PPI and Oil Prices Fuel Inflation Concerns, Can CPI Change Gold's Direction?As of the Asian session on September 11, gold prices (XAUUSD) remained in weak consolidation today after dropping sharply to near $4,300 on Thursday, with the latest price trading around
Author  TradingKey
Sep 11, Fri
As of the Asian session on September 11, gold prices (XAUUSD) remained in weak consolidation today after dropping sharply to near $4,300 on Thursday, with the latest price trading around
Related Instrument
goTop
quote