- Gold price tries to move lower into support after FOMC minutes.
- The minutes from the Fed show that officials are split on support for more hikes.
The Gold price is mixed around the minutes of the Federal Open Market Committee, which showed that board members agreed that inflation risks were still unacceptably high, but officials also generally agreed that the scope of further increases was less certain. The price of gold has so far ranged between a low of $1,961 and a high of $1,965 around the event, but has so far been in a wider range between $1,956.77 and $1,985.39.
FOMC minutes, keynotes
- Some participants indicated that further consolidation of the policy was likely to be necessary at future meetings.
- Some participants stressed that it was critical that the policy not signal the likelihood of rate cuts this year or rule out further increases.
- Fed staff continue to forecast a mild recession beginning later this year, followed by a modest recovery.
- Several participants said that if the economy developed in line with their outlook, further policy tightening might not be needed.
- Participants generally agreed that the extent to which further interest rate hikes may be appropriate has become less certain.
- Many participants focused on the need to maintain non-commitment beyond the May meeting.
- Participants concluded that stress in the banking sector would likely affect economic activity, but to an uncertain extent.
- Participants agreed that inflation was unacceptably high and falling more slowly than expected.
- Some participants noted concerns that the federal debt limit may not be raised in time, threatening significant disruption to the financial system and tighter financial conditions.
Overall, the Fed’s minutes show officials were divided in support for more hikes. The market as such has no direction.
Meanwhile, analysts at TD Securities explained that while the debt ceiling headlines are noisy, there is still a signal in the noise.
´´Gold prices managed to rise yesterday despite headwinds from a rising broad dollar, revealing significant behind-the-scenes demand. This fits into our view of an impending sell-off in precious metals. In fact, we argue that position setting is favorable for gold bulls who have kept their position sizes limited, while systematic trend followers still set the bar high for further CTA liquidations,” the analysts explained.
”The important thing,” they said, ”is that discretionary traders have yet to join the rally, which is in contrast to the typical recession playbook.”
“Meanwhile, pressure on the banking sector remains and the data is likely to soften further, fueling expectations of a deepening tapering cycle on the horizon.” Recent liquidations and short acquisitions may eventually add dry powder for further price gains,” the analysts concluded.
Technical analysis of gold
The price of gold is testing a support structure, but while it is below trendline resistance, the bias is bearish:
Bears will need to break below $1,950 to confirm the prospect of a continuation of the longs that have been building since March.