Gold (XAU) price rose by over 1% on Tuesday, breaching the critical 2,000 mark. Still, XAUUSD later declined as the FOMC minutes revealed officials’ restrictive monetary policy stance.
Possible effects for traders
The Federal Reserve (Fed) minutes had no hints of imminent interest rate cuts, but officials discussed a cautious approach to additional hikes. According to yesterday’s protocols, ‘participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the Committee’s inflation objective was insufficient.’ Fundamentally, XAUUSD remains bullish amid rising expectations of potential U.S. interest rate cuts next year following weaker-than-expected economic data. The Fed is expected to maintain its current base rate in the December meeting, but the market sees a 30% chance of a rate cut by March 2024. Indeed, the latest data indicates that the U.S. economy is slowing. In October, existing home sales fell to their lowest point in over 13 years, according to Tuesday’s report. Meanwhile, the physical demand for gold seems strong. Swiss gold exports reached their highest point since May, driven by a rise in exports to India during its festive season.
XAUUSD was relatively flat during the Asian trading session but rose slightly in the early European trading hours. Today, several events will likely provoke extra volatility in gold. Traders should focus on three events: Jobless Claims and Durable Goods Orders reports at 1:30 p.m. UTC and the Consumer Sentiment Index at 3:00 p.m. UTC. If the numbers reveal a continuing weakening of the U.S. economy, the chance of imminent rate cuts will increase, pushing XAUUSD higher. However, the pair may sharply correct downwards if the figures are better than expected. ‘Spot gold may retrace into the $1,972–1,982 range per ounce, as suggested by a rising channel,’ said Reuters analyst Wang Tao.
