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Gold price consolidates near all-time peak; looks to FOMC minutes for fresh impetus

  • Gold price attracts some dip-buying as trade war fears continue to underpin safe-haven assets. 
  • Fed rate cut bets keep the USD bulls on the defensive and further lend support to the XAU/USD.
  • Traders now await the release of the FOMC meeting minutes before placing fresh directional bets.

Gold price (XAU/USD) extended its consolidative price move through the first half of the European session on Wednesday and remains close to the all-time peak touched last week. Traders now seem reluctant and opt to wait for the release of the FOMC meeting minutes, which might provide cues about the Federal Reserve's (Fed) rate-cut path. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the non-yielding yellow metal.

In the meantime, bets that the US central bank will cut interest rates further keep the USD bulls on the defensive. Apart from this, worries that US President Donald Trump's tariff plans could trigger a global trade war continue to act as a tailwind for the safe-haven Gold price. Moreover, the lack of any meaningful selling interest suggests that the path of least resistance for the XAU/USD is to the upside. Hence, any corrective pullback might still be seen as a buying opportunity and is more likely to remain cushioned. 

Gold price traders seen non-committed ahead of the FOMC meeting minutes

  • The optimism over a delay in the implementation of US President Donald Trump's reciprocal tariffs and talks aimed at ending the protracted Russia-Ukraine war prompted some profit-taking around the Gold price on Wednesday. 
  • Investors remain worried about a potential escalation in global trade tensions on the back of Trump's protectionist policies. This, along with bets for further policy easing by the Federal Reserve, supports the safe-haven bullion. 
  • The disappointing release of US Retail Sales figures on Friday, along with mixed signals on inflation, suggests that the US central bank could possibly cut interest rates at the September or October monetary policy meeting. 
  • In fact, the Fed Funds Futures see the possibility of a 40 basis point rate cut by the end of this year. This keeps a lid on the US Dollar (USD) recovery from a two-month low and should further underpin the XAU/USD.
  • San Francisco Fed President Mary Daly said on Tuesday that the US central bank should keep short-term borrowing costs where they are until the progress toward achieving the 2% inflation target is more visible.
  • Hence, the market focus will remain on the release of the Fed's January meeting minutes, which will be looked upon for clues about the central bank's interest rate trajectory and influence on the non-yielding yellow metal.

Gold price technical setup remains tilted firmly in favor of bullish traders

fxsoriginal

From a technical perspective, the range-bound price action might still be categorized as a bullish consolidation phase against the backdrop of the recent strong move up to the all-time peak. That said, the daily Relative Strength Index (RSI) remains close to the overbought territory and supports prospects for an extension of the consolidative price move. Nevertheless, the setup remains tilted in favor of bulls and suggests that the path of least resistance for the XAU/USD remains to the upside. 

Meanwhile, weakness below the $2,925 area is likely to find some support near the $2,900 mark ahead of the $2,878-2,876 zone or the lower boundary of the short-term trading range. A convincing break below the latter could drag the Gold price to the $2,860-2,855 area en route to the $2,834 region. Failure to defend the said support levels might prompt some technical selling and drag the XAU/USD towards the $2,815 region en route to the $2,800 mark and the $2,785-2,784 area.

On the flip side, the $2,940-2,942 region, or the record high touched earlier this month, might continue to act as an immediate strong barrier. Some follow-through buying will be seen as a fresh trigger for bullish traders and set the stage for an extension of a well-established uptrend witnessed over the past two months or so.

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 Feb 19, 2025 19:00

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.

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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