Gold Nears 2,000 and FOMC Minutes Expected to be Dovish
On Monday, the price of gold (XAU) fell to 1,965, but then rebounded sharply thanks to falling US Treasury yields.
has gained more than 2% over the past six trading sessions, as declining US inflation fueled investor expectations that the Federal Reserve (Fed) could begin cutting interest rates in early 2024. According to CME FedWatch tool, the market is currently pricing in a 30% chance of a rate cut in March and a 50% chance of a 25 basis point cut by May. At the same time, investors may be becoming overly optimistic about the end of US monetary policy tightening, while the Federal Reserve may remain hawkish for longer than the market expects. Thomas Barkin, president of the Richmond Federal Reserve, recently stated that inflation is expected to persist, encouraging the Federal Reserve to maintain high interest rates.
XAU/USD rose sharply during the early Asian and European trading sessions as (DXY) and US Treasury yields continued to fall. Today, traders should focus on the Federal Open Market Committee (FOMC) minutes from the November meeting at 7:00 pm UTC. The release of protocols is usually associated with increased volatility, but some analysts expect the market to be calm. ‘I think the minutes will not be important. There was going to be no mention of cuts, Jerome Powell made that very clear in his press conference. It’s simply the market expecting cuts from the Federal Reserve,” said Edward Meir, metals analyst at Marex.
“Spot gold may re-hit its Oct. 27 high of $2,009.29 an ounce as it has broken through a resistance at 1,991,” said Reuters analyst Wang Tao.
AUD at four-month high after hawkish RBA minutes released
On Monday, the (AUD) rose 0.74% and settled above the critical level of 0.65500 as investors continued to close their bullish bets on the dollar, believing that the Federal Reserve (Fed) had finished raising its base rate.
AUD/USD is up 3% in the last six trading sessions as the combination of positive factors pushed the currency towards a four-month high. First, the market does not expect any further rate hikes from the Federal Reserve, as recent US economic data showed that the economy and inflation are slowing. Second, there are reports that China’s central bank is considering launching a stimulus program to support the economy. Bloomberg reported that Chinese regulators were drawing up a list of 50 property developers eligible for a variety of financing. China is a key importer of Australian products and any optimistic economic news tends to positively impact the AUD exchange rate. Finally, the Reserve Bank of Australia (RBA) recently released the minutes of its previous meeting, which clearly show that the sentiment of its officials remains quite hawkish. The protocols stated that “members agreed that there was a risk that inflation expectations would increase if the Board left the cash rate unchanged at this meeting.”
AUD/USD continued to rise strongly in the early Asian and European trading sessions after the tough RBA minutes. AUD/USD may see additional volatility today due to the FOMC minutes at 7 pm UTC. Now, the market seems to believe that US inflation has been defeated and the regulator may turn dovish. Therefore, AUD/USD may fall sharply if the minutes show that the Federal Reserve is still considering further rate hikes.