On Monday, gold (XAU) price dropped to 1,965 but later recovered sharply on the back of falling U.S. Treasury yields.
Possible effects for traders
XAUUSD has gained more than 2% over the past six trading sessions as easing U.S. inflation fuelled investors’ expectations that the Federal Reserve (Fed) may begin cutting interest rates in early 2024. According to the CME FedWatch Tool, the market is currently pricing in a 30% chance of a rate cut in March and a 50% probability of a 25-basis-point cut by May. At the same time, investors may be getting overly optimistic about the end of the U.S. monetary policy tightening, while the Fed may remain hawkish longer than the market expects. Thomas Barkin, Richmond Fed President, recently stated that inflation is expected to persist, encouraging the Fed to maintain high interest rates.
XAUUSD rose sharply during the Asian and early European trading sessions as the U.S. Dollar Index (DXY) and U.S. Treasury yields continued declining. Today, traders should focus on the Federal Open Market Committee (FOMC) minutes from the November meeting at 7:00 p.m. UTC. The release of the protocols is usually associated with increased volatility, but some analysts expect the market to be quiet. ‘I think the minutes will be a non-event. <…> There was not going to be any mention of cuts, Jerome Powell made that very clear in his news conference. It’s just the market that’s expecting cuts from the Fed,’ said Edward Meir, a metals analyst at Marex. ‘Spot gold may revisit its 27 October high of $2,009.29 per ounce, as it has pierced above a resistance at 1,991,’ said Reuters analyst Wang Tao.
%20and%20U.S.%20Treasury%20yields%20continued%20declining.%20Today,%20traders%20should%20focus%20on%20the%20Federal%20Open%20Market%20Committee%20(FOMC)%20minutes%20from%20the%20November%20meeting%20at%207:00%20p.m.%20UTC.%20The%20release%20of%20the%20protocols%20is%20usually%20associated%20with%20increased%20volatility,%20but%20some%20analysts%20expect%20the%20market%20to%20be%20quiet.%20'I%20think%20the%20minutes%20will%20be%20a%20non-event.%20There%20was%20not%20going%20to%20be%20any%20mention%20of%20cuts,%20Jerome%20Powell%20made%20that%20very%20clear%20in%20his%20news%20conference.%20It's%20just%20the%20market%20that's%20expecting%20cuts%20from%20the%20Fed,'%20said%20Edward%20Meir,%20a%20metals%20analyst%20at%20Marex.%20'Spot%20gold%20may%20revisit%20its%2027%20October%20high%20of%20$2,009.29%20per%20ounce,%20as%20it%20has%20pierced%20above%20a%20resistance%20at%201,991,'%20said%20Reuters%20analyst%20Wang%20Tao.){kind=link}