Gold Slides Below $1,905 as FOMC Meeting Minutes Extend Interest
On Wednesday, gold relinquished its previous gains and slipped below $1,905, marking its lowest point since March. This decline was prompted by the release of minutes from the latest FOMC meeting, which extended the projected timeline for the Federal Reserve's potential interest rate reductions. This shift dampened demand for assets like gold that don't bear interest.
The Federal Reserve remains wary of lingering inflation risks, potentially leaving room for interest rate hikes. Nonetheless, certain policymakers expressed reservations about accurately predicting the duration of policy effects, leading to cautiousness among the more dovish members of the Committee.
The decline in precious metals was further influenced by robust economic indicators. July saw greater-than-anticipated expansion in industrial production, alleviating concerns that the sector's growth might wane due to increased borrowing costs. This development could offer the FOMC some flexibility in tightening measures.
XAUUSD
BUY 1891-1892💯
✅ TP1: 1900
✅ TP2: 1905
🛑 SL: 1888
The Federal Reserve remains wary of lingering inflation risks, potentially leaving room for interest rate hikes. Nonetheless, certain policymakers expressed reservations about accurately predicting the duration of policy effects, leading to cautiousness among the more dovish members of the Committee.
The decline in precious metals was further influenced by robust economic indicators. July saw greater-than-anticipated expansion in industrial production, alleviating concerns that the sector's growth might wane due to increased borrowing costs. This development could offer the FOMC some flexibility in tightening measures.
XAUUSD
BUY 1891-1892💯 ✅ TP1: 1900
✅ TP2: 1905
🛑 SL: 1888
Comment:
On Thursday, gold prices reached their lowest point in five months, driven by the increasing strength of the U.S. dollar and rising Treasury yields. This surge followed positive economic data, further reinforcing the belief that the Federal Reserve would continue its course of policy tightening.
Comment:
At 0141 GMT, spot gold, trading at $1,891.70 per ounce, displayed a subdued demeanor, marking its lowest point since March 15. Simultaneously, U.S. gold futures recorded a 0.3% decline, settling at $1,921.80.
Comment:
The minutes from the Federal Reserve's July meeting revealed that "the majority" of policymakers maintained their emphasis on combating inflation, while "certain participants" highlighted potential risks to the economy associated with excessive rate hikes.
Comment:
Reaching a peak not witnessed in 10 months, the benchmark 10-year U.S. Treasury yields propelled the dollar to its most elevated position since mid-June. This move diverted investors' attention from non-interest-bearing gold assets.
Comment:
Since around mid-July, gold prices have been in decline, coinciding with the strengthening of the US dollar. As inflation levels have stabilized and the Federal Reserve is anticipated to uphold elevated interest rates, real yields have consistently risen (depicted in the accompanying graph). The recently released minutes from the FOMC meeting reaffirmed a hawkish inclination, with certain Fed members not ruling out potential future rate hikes if deemed necessary. In the present day, US Treasury yields have once again inched upwards, solidifying the prevailing sentiment of a prolonged period of elevated rates.
