Gold Price Looks to FOMC Minutes as Catalyst for Volatility
GOLD PRICE OUTLOOK – EYES ON FOMC MINUTES, US DOLLAR, YIELDS
- Gold price action climbed on Tuesday to challenge the psychological $1,800/oz level
- Gold likely benefited from a sharp move lower in ten-year Treasury yields to 1.35%
- XAU/USD volatility might accelerate with the release of Fed meeting minutes on tap
Gold gained ground and briefly topped the $1,800-price level during Tuesday’s trading session. The precious metal closed 0.3% higher on balance after struggling to maintain altitude above the psychologically-significant area of resistance. XAU/USD was able to advance despite broad-based US Dollar strength as gold price action likely benefited from the plunge in ten-year Treasury yields. That said, gold price action might look to the upcoming release of June 2021 Fed meeting minuets as a possible catalyst for volatility.
XAU/USD – GOLD PRICE CHART: WEEKLY TIME FRAME (25 NOV 2019 TO 06 JUL 2021)
FOMC officials projected two interest rate hikes by year-end 2023 in the latest dot plot, and Fed Chair Powell acknowledged during his press conference that the central bank officially started to ‘talk about talking about’ tapering asset purchases. This news unsurprisingly dealt a bearish blow to gold price action, and while Wednesday’s release of June 2021 Fed meeting minutes will be backward looking, details could underscore the hawkish shift in Fed policy guidance and reignite XAU/USD selling pressure in turn.
That said, as discussed in my 3Q top trade idea, gold price pullbacks could provide attractive opportunities worth consideration. Seeing that the FOMC minutes arguably provide stale information, and in light of more recent nonfarm payrolls data showing an uptick in the unemployment rate, the Fed could have enough ammunition to delay taper talks. This has potential to fuel an unwind of Fed rate hike bets, which in turn, stands to maintain downward pressure on Treasury yields and keep gold prices well supported.
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