The gold price (XAU/USD) continues to face pressure as investors anticipate the release of the Federal Open Market Committee (FOMC) Minutes from September’s meeting, scheduled for 18:00 GMT. These minutes are expected to reveal the reasoning behind the significant rate cut and offer insights into the inflation outlook and overall economic health.
Overview of FOMC’s Recent Decisions
During the September meeting, the Federal Reserve initiated a shift in policy after more than two years of maintaining a restrictive stance. The committee, with only one dissenter, Michelle Bowman, agreed on a 50 basis points (bps) rate cut. The decision was driven by the Fed’s focus on boosting employment and a belief that inflation is on track to return to the 2% target.
Upcoming Economic Indicators to Watch
This week, investors are closely monitoring the release of the US Consumer Price Index (CPI) data, expected on Thursday. Analysts predict that core CPI, which excludes volatile items like food and energy, will rise by 3.2% annually. Meanwhile, the headline CPI is forecast to decrease slightly from 2.5% in August to 2.3% in September.
The upcoming inflation data will significantly influence the Federal Reserve’s decisions on future interest rates for the remainder of the year. Based on data from the CME FedWatch Tool, there’s a strong likelihood of two more rate cuts, each by 25 bps, in the Fed’s remaining meetings this year.
Inflation Worries Persist
While some analysts are optimistic about inflation trends, Dallas Fed President Lorie Logan cautioned that the risks haven’t completely disappeared. In a recent speech, she emphasized the need for a measured, gradual approach to rate cuts moving forward.
Gold Price Influencers: Strong Dollar and Treasury Yields
On Wednesday, the gold price dropped to approximately $2,600, mainly due to the strength of the US Dollar (USD). The US Dollar Index (DXY), which compares the dollar’s value to six other major currencies, rose to around 102.80. A stronger dollar increases the cost of investing in gold, making the metal less attractive to investors.
Additionally, rising US Treasury yields—with 10-year yields nearing 4.05%—further weighed on gold. Higher interest-bearing assets increase the opportunity cost of holding non-yielding assets like gold, driving down its price.
Geopolitical Tensions Provide Some Support
Despite the downward pressure, the gold price’s decline may be limited due to escalating geopolitical tensions in the Middle East. Following the death of Hezbollah leader Hassan Nasrallah, the conflict between Israel and Iran-backed Hezbollah has intensified. Historically, gold has gained appeal during times of geopolitical unrest.
Gold’s Technical Outlook
From a technical standpoint, gold has dropped to around $2,600, down from its all-time high of $2,685. Despite profit-taking, the overall trend remains bullish, with both the 20-day and 50-day Exponential Moving Averages (EMAs) pointing upward at $2,615 and $2,550, respectively.
The price is supported by an upward trendline starting from the April 12 low of $2,431.60. Additionally, the Relative Strength Index (RSI) is currently in the 40.00-60.00 range, indicating weakening momentum but an overall upward trajectory.
Conclusion:
As the FOMC Minutes approach, investors are keeping a close watch on inflation data and geopolitical developments. These factors will likely shape gold price movements in the short term. With market expectations leaning toward further rate cuts, the gold price could see volatility, offering opportunities for traders.
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