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
USD/JPY Price Forecast: Continues to hold key support level around 152.00The USD/JPY pair trades 0.27% higher to near 153.70 during the European trading session on Wednesday.
Author  FXStreet
11 hours ago
The USD/JPY pair trades 0.27% higher to near 153.70 during the European trading session on Wednesday.
placeholder
Top 3 Price Prediction: Bitcoin, Ethereum, Ripple – BTC, ETH and XRP face downside risk as bears regain control Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) remain under pressure on Wednesday, with the broader trend still sideways. BTC is edging below $68,000, nearing the lower consolidating boundary, while ETH and XRP also declined slightly, approaching their key supports.
Author  FXStreet
15 hours ago
Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) remain under pressure on Wednesday, with the broader trend still sideways. BTC is edging below $68,000, nearing the lower consolidating boundary, while ETH and XRP also declined slightly, approaching their key supports.
placeholder
Gold declines to near $4,850 as low liquidity, easing tensions weigh on demandGold price (XAU/USD) attracts some sellers to around $4,860 during the early Asian trading hours on Wednesday. The precious metal falls amid thin holiday trading, with much of Asia closed for the Lunar New Year.
Author  FXStreet
18 hours ago
Gold price (XAU/USD) attracts some sellers to around $4,860 during the early Asian trading hours on Wednesday. The precious metal falls amid thin holiday trading, with much of Asia closed for the Lunar New Year.
placeholder
EUR/USD Forecast: Euro weakens as risk mood soursEUR/USD struggles to find a foothold and trades at a fresh weekly low below 1.1850 after closing in negative territory on Monday. In the absence of high-impact data releases, the risk-averse market atmosphere could make it difficult for the pair to stage a rebound.
Author  FXStreet
Yesterday 08: 55
EUR/USD struggles to find a foothold and trades at a fresh weekly low below 1.1850 after closing in negative territory on Monday. In the absence of high-impact data releases, the risk-averse market atmosphere could make it difficult for the pair to stage a rebound.
placeholder
Gold weakens as USD uptick and risk-on mood dominate ahead of FOMC MinutesGold (XAU/USD) attracts some follow-through selling for the second straight day and slides to the $4,922 area during the Asian session on Tuesday amid thin liquidity on the back of the Lunar New Year holidays in China.
Author  FXStreet
Yesterday 05: 58
Gold (XAU/USD) attracts some follow-through selling for the second straight day and slides to the $4,922 area during the Asian session on Tuesday amid thin liquidity on the back of the Lunar New Year holidays in China.
Related Instrument
goTop
quote