Gold Prices Teeter Ahead of Anticipated FOMC Minutes Release

  • Gold prices hover in the vicinity of $1,900.00 while investors wait for Fed Minutes.
  • The US Dollar profited from US economic strength and an economic slower pace in China.
  • The robust rate of consumer spending caused by the strong wage growth may ensure that US core inflation is high.

The price of gold (XAU/USD) has been battling with the vital support of $1,900 as investors wait for minutes from the Federal Open Market Committee (FOMC) minutes to get guidelines on inflation and the rate of interest at its peak. The precious metal can still get offers from investors since the US Dollar and Treasury yields rise due to the strength of the US economy, which is in stark contrast with China’s weak economic outlook.

A robust consumer spending trend fueled by strong wage growth indicates a lot of resilience in the US economy. It could make core inflation more sluggish and make it necessary for Federal Reserve (Fed) policymakers to keep interest rates high for longer. Fed policymakers are likely to keep the policy of interest rates unchanged in September as spending on expensive items decreases because of higher rent costs.

Daily Digest Market Movers: Gold price will be awaited FOMC minutes

  • Gold price targets sustainability above $1,900. This is helped by the lack of direction for the US Dollar ahead of the minutes of the FOMC released at 18:00 GMT. It will be announced around 18:00 GMT.
  • The minutes of the FOMC’s September meeting on monetary policy will give guidance on interest rates as well as the forecast for inflation over the remaining part of 2023.
  • As per CME Group’s CME Group’s FedWatch tool, the markets generally anticipate interest rates to remain constant throughout the remainder of the year.
  • Yet, US economic resilience due to a stronger pace of consumer spending and an incredibly tight labor market may make it necessary for Federal Reserve policymakers to keep the interest rate high for a prolonged time.
  • In contrast, Minneapolis Fed President Neel Kashkari stated on Tuesday that although the US central bank is indeed making some strides in the fight against inflation, the interest rates may be required to move higher to achieve the goal.
  • The US Dollar Index can remain at auction levels of 103.00 in the face of further signs of a slowdown in China’s economy and the US’s strong consumer spending momentum.
  • It is believed that the Chinese economy is experiencing a volatile environment with an overall downturn in general demand and a decline in exports.
  • The People’s Bank of China (PBoC) cut the medium-term one-year loan facility (MLF) rate by 15 basis points (bps) to 2.50 percent to maintain the liquidity in banks at reasonable levels.
  • A more dovish decision on interest rates by the PBoC was made after home prices in China decreased in June for the first time this year.
  • A slowdown in China’s Chinese economy has boosted the attraction of USD. US Dollar.
  • US retail sales, a measure of consumer spending, increased faster in July, partly fueled by the strong wage growth. Retail Sales grew by 0.7 percent, higher than the 0.4 percent forecast and 0.2 percent increase recorded in the previous month. Retail Sales that did not include automobiles increased by 1.0 percent, which suggests an increased demand for durables and fast consumables.
  • 10-year US Treasury yields remain around 4.20 percent as investors believe that interest rates will remain high for a longer time amid an optimistic economic outlook.
  • The risk profile remains bearish after Fitch’s warning of the downgrading of several of the biggest US lenders. After downgrading the US bank’s “operating environment” to AAfrom AA Fitch, a credit rating company warned of downgrading several banks, including J.P. Morgan.
  • Alongside the FOMC minutes, Investors will also be watching industrial production data for July. Production is expected to increase by 0.3 percent, ranging from an 0.5 percent decrease in June.

Technical Analysis: The price of gold remains below the 200-EMA.

Gold price struggles to hold auction prices above the current resistance of $1,900. Gold continues to suffer from selling pressure because of the strength of the US Dollar and Treasury yields. The yellow metal continues following a bearish cross between the 20-50-day and 20-day Exponential Averages (EMAs). Gold prices are hovering at the 200-EMA, and a breakdown below this mark will reveal further negative risks.

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