Gold Price Forecast: XAU/USD drops heavily on hawkish FOMC minutes
|- Gold falls on hawkish FOMC minutes which sent both the US dollar and yields higher.
- FOMC minutes point to a faster increase of the federal funds rate.
Gold has fallen sharply on the back of the Federal Open Market Committee minutes that stated, ''in light of elevated inflation pressures & strengthening labour market, participants judged increase in policy accommodation provided by the ongoing pace of net asset purchases no longer necessary.''
Gold fell from $1,824.50 to a low of $1,812.50 on the kneejerk and is on the verge of turning red on the day.
The minutes stated that ''participants remarked FOMC should continue to be prepared to adjust the pace of purchases if warranted by changes in the economic outlook.''
They also stated that ''most participants judged conditions for a rate hike could be met relatively soon if the recent pace of labour market improvements continued, adding, ''given outlooks for the economy, labour market, inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated.''
Additionally, the minutes also stated that a ''quicker conclusion of net asset purchases would better position the FOMC to set the policy to address the full range of plausible economic outcomes.''
Consequently, the interest rate futures now price in an 80% chance of Fed hike at the March meeting. The US 10-year yield is now making a fresh daily high of 1.71%. This is the highest level since October of last year. The 2-years are surging to 0.8340%.
Gold technical analysis
The price fell sharply on the minutes as follows:
The move into support is key as a break here opens the risk of a move back towards $1,810/00 due to the imbalance of price below $1,812.
However, from a longer-term perspective, the price still has some work to do before it is back under pressure around the trendline uspport.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.