Gold price is trading in a narrow range heading into the European session. An increase in US bond yields is acting as a barrier for the XAU/USD, while Fed rate uncertainty and softer risk tone are offering some support to the precious metal. Despite a weaker US Dollar, the Gold price remains below the $2,000 psychological mark. The FOMC minutes released on Tuesday revealed a more hawkish tone, and upbeat US labor market and consumer sentiment data could lead to higher interest rates for longer, strengthening US Treasury bond yields and benefiting the non-yielding Gold price. The markets seem to believe that the Fed will not hike rates, which is also hindering the US Dollar from gaining meaningful buying support from markets.
The Gold price continues to lack meaningful traction amid mixed Fed cues, and the market is still uncertain about the direction of XAU/USD. The FOMC meeting minutes showed that policymakers backed the case for higher interest rates for a longer period to combat inflation, but market expectations for rate cuts in 2024 are holding back traders from making bets around the XAU/USD. The release of the October inflation report caused bets for a rate hike in December to shrink to zero, and the market is pricing over a 25% chance of a rate cut as early as March 2024. The USD is finding support from positive US labor market and consumer sentiment data, along with rising US Treasury bond yields, while dovish Fed expectations might support the commodity ahead of the flash US PMI prints for November.
The Gold price is struggling to move above the $2,000 psychological mark, with repeated failures ahead of the $2,010 level. Oscillators on the daily chart are holding in the positive territory, supporting prospects for dip-buying near the $1,989-1,988 zone. A convincing break below the $1,965 area might expose the 200-day Simple Moving Average (SMA) and $1,933-1,932 confluence. The $2,000 mark continues to act as an immediate barrier, and some follow-through buying could trigger a positive move towards the $2,022 resistance. The table below shows the percentage change of US Dollar (USD) against listed major currencies today, with the USD showing weakness against the Japanese Yen.
Monetary policy in the US is shaped by the Federal Reserve (Fed), which has two mandates to achieve price stability and foster full employment. The Fed adjusts interest rates when inflation is above or below the 2% target, which affects the strength of the US Dollar. The Fed holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. In extreme situations, the Federal Reserve may resort to policies named Quantitative Easing (QE) and Quantitative Tightening (QT).
