Gold price falls further with FOMC Minutes taking centre stage

Gold price (XAU/USD) is expected to remain on tenterhooks with investors focusing on the Federal Open Market Committee (FOMC) Minutes of the September meeting, which will be published at 18:00 GMT. The FOMC Minutes will provide a detailed explanation behind the hefty rate cut and fresh cues about inflation and the economic outlook.

In September’s meeting, the Federal Reserve started the policy-easing cycle after maintaining a restrictive policy stance for more than two and a half years. Fed officials almost unanimously (with only Michelle Bowman dissenting) voted for a sizable rate cut of 50 bps as they were more concerned about reviving job growth, with confidence that inflation is on track to return sustainably to the bank’s target of 2%.

This week, investors will pay close attention to the US Consumer Price Index (CPI) data for September, which will be released on Thursday. Economists estimate the annual core CPI – which excludes volatile food and energy prices – to have grown steadily by 3.2%. Annual headline CPI is expected to have decelerated further to 2.3% from 2.5% in August.

The inflation data will significantly influence market expectations for the Fed’s interest rate outlook for the remainder of the year. According to the CME FedWatch tool, 30-day Federal Fund Futures pricing data shows that there will be a 25-bps interest rate cut in each of the two meetings remaining this year.

Meanwhile, Dallas Fed Bank President Lorie Logan has warned that upside risks to inflation have not compeletly faded yet, in her speech in New York trading hours. When asked about the interest rate outlook, Logan supported for a gradual rate cut approach.

Daily digest market movers: Gold price is weighed down by upbeat US Dollar

• Gold price slumps to near $2,600 in Wednesday's North American session. The precious metal has been battered by the upbeat US Dollar (USD), which has strengthened as traders are pricing out another Federal Reserve (Fed) larger-than-usual interest rate cut of 50 basis points (bps) in their next meeting in November.
• The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has extended its upside to near 102.80. An appreciation in the US Dollar makes investment in the Gold price an expensive bet for investors.
• Meanwhile, 10-year US Treasury yields jump further to near 4.05% in European trading hours. Higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Gold.
• Traders have priced out Fed large rate cut bets as upbeat United States (US) Nonfarm Payrolls (NFP) data for September reduced the risk of an economic slowdown. The US job report showed that labor demand remained robust, the Unemployment Rate decelerated, and wage growth was stronger than expected.
• However, the downside in Gold price is expected to remain limited due to escalating tensions in the Middle East region. The war between Israel and Iran-backed-Hezbollah intensified after the former killed Hezbollah leader Hassan Nasrallah and his subsequent replacements. Historically, the appeal of precious metals, such as Gold, improved amid geopolitical woes.

Technical Analysis: Gold price struggles above $2,600

Gold price extends its correction to near $2,600 from its all-time high of $2,685 as profit-booking remains intact. However, the overall trend of the Gold price remains bullish as the 20- and 50-day Exponential Moving Averages (EMAs) at $2,615 and $2,550, respectively, are sloping higher.

Upward-sloping trendline from the April 12 high of $2,431.60 will act as major support for the Gold price bulls.

The 14-day Relative Strength Index (RSI) falls into the 40.00-60.00 range, suggesting a weakening of momentum. However, the upside trend remains intact.