Key points:
Gold prices held their position around $2,619.75 per ounce in early trading on Wednesday, having hit a two-week low in the previous session.
While gold futures edged slightly higher by 0.1% to $2,638.20, prices have yet to recover from the all-time high of $2,685.42 recorded on 26 September.
Traders are hesitant ahead of the release of the Federal Reserve’s meeting minutes, which could hint at the future trajectory of US interest rates.
See: Gold trading with bearish momentum below 2,624.32, with support at 2,604.78 on the VT Markets app.
The dollar index’s recent rally to a seven-week high has been a critical factor in capping gold’s upward momentum. A stronger dollar makes gold more expensive for holders of other currencies, leading to subdued demand. The upcoming minutes from the Fed’s September policy meeting, set to be released at 1800 GMT, are likely to reveal the central bank’s stance on inflation and future rate cuts, making them a key event for the precious metals market.
Traders are also closely watching the US Consumer Price Index (CPI) report, due on Thursday, and the Producer Price Index (PPI) data on Friday. A soft CPI reading could boost gold prices, as lower inflation could increase the chances of rate cuts by the Fed.
In case you missed it: Gold Down as Fed Rate Expectations Cool
With the CME FedWatch Tool now indicating an 89% chance of a 25-basis-point rate cut next month, the outlook for gold could hinge on inflation data. Following a robust jobs report last week, traders had initially priced in a higher chance of a 50-basis-point cut, but sentiment has since shifted. Boston Fed President Susan Collins added to this narrative, stating that weakening inflation trends could support further rate cuts.
Historically, gold performs well in low-interest-rate environments, given its lack of yield. This dynamic makes any signs of inflation cooling down and subsequent Fed rate cuts particularly bullish for the precious metal.
September saw inflows into gold exchange-traded funds (ETFs) for the fifth consecutive month, with North American-listed funds continuing to increase their holdings, according to the World Gold Council.
In the broader precious metals market, spot silver fell 0.3% to $30.62, while platinum gained 0.4% to $953.90. Palladium slipped by 0.3% to $1,018.04, reflecting mixed sentiment across the sector.
Traders are likely to stay cautious ahead of the Fed minutes and inflation reports, with these data points set to shape the outlook for both gold and broader commodity markets in the short term.
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