Gold trades with mild negative bias ahead of FOMC Minutes – Crypto News – Crypto News
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XAU/USD reverses Fed Minutes inspired gains, $1,735 in focus XAU/USD reverses Fed Minutes inspired gains, $1,735 in focus

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Gold trades with mild negative bias ahead of FOMC Minutes – Crypto News

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  • Gold price trades with mild negative bias in Wednesday’s early Asian session.
  • The cautious approach from Fed officials weighs on precious metals. 
  • Gold traders will monitor the  FOMC Minutes and Fed’s Goolsbee speech. 

Gold price (XAU/USD) trades on a negative note on Wednesday after retreating from a record high on Monday. Members of the Federal Reserve (Fed) warned that the US central bank needed much more convincing that inflation was easing before it could begin cutting interest rates, emphasizing the Fed is likely to keep rates higher for longer. This, in turn, might boost the Greenback and weigh the USD-denominated gold lower. 

Nonetheless, the yellow metal’s downside might be limited amid the renewed US-China trade tensions, Middle East geopolitical tensions, and the strong demand from central banks and Asian buyers, which might provide some support to the yellow metal. Later on Wednesday, gold traders will keep an eye on FOMC Minutes, along with the Fed’s Goolsbee speech. 

Daily Digest Market Movers: Gold price edges lower as uncertainties over US interest rates persisted

  • Fed Governor Christopher Waller said that he does not think further rate hikes will be necessary, adding he will need some convincing data before he backs cuts anytime soon. 
  • Atlanta Fed President Raphael Bostic noted that the US central bank has to be cautious about the first-rate move. Bostic further stated that he would “rather wait longer for a rate cut to be sure inflation does not start to bounce around.”
  • Cleveland Fed President Loretta Mester said that keeping rates restrictive is not a concern right now given the strength of the jobs market.
  • Boston Fed President Susan Collins said on Wednesday that progress toward a lower interest rate adjustment will take longer. 
  • Financial markets expect the first cut to happen in September at the earliest, with two reductions of a quarter percentage point before the end of the year, according to the CME Group’s FedWatch tool. 
  • On Tuesday, the US officially announced tariff hikes on a wide range of Chinese goods, while China  may consider increasing temporary tariff rates on imported cars equipped with large-displacement engines. 

Technical Analysis: Gold price’s outlook remains positive

Gold price trades with a mild negative bias on the day. XAU/USD has formed an ascending trend channel since the beginning of May. Technically, the yellow metal maintains the constructive outlook unchanged as it holds above the key 100-period Exponential Moving Average (EMA) on the four-hour timeframe. The Relative Strength Index (RSI) remains in the bullish zone around 63.00, suggesting that further upside looks favorable for the time being. 

The first upside target for the precious metal will emerge near an all-time high of $2,450. A bullish breakout above this level will see a rally to the upper boundary of an ascending trend channel at $2,465, en route to the $2,500 psychological barrier. 

In the bearish case, the lower limit of the ascending trend channel and round mark in the $2,400–$2,405 zone act as an initial support level for XAU/USD. Further south, the downside target to watch is a high of May 10 of $2,378, followed by the 100-period EMA of $2,364. 

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Australian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.13% -0.10% 0.18% 0.36% 0.33% -0.08% 0.24%
EUR -0.14%   -0.22% 0.06% 0.25% 0.22% -0.20% 0.11%
GBP 0.10% 0.22%   0.28% 0.46% 0.44% 0.03% 0.33%
CAD -0.17% -0.05% -0.25%   0.20% 0.17% -0.25% 0.07%
AUD -0.37% -0.25% -0.47% -0.19%   -0.04% -0.45% -0.14%
JPY -0.33% -0.20% -0.44% -0.17% 0.03%   -0.43% -0.12%
NZD 0.08% 0.19% -0.03% 0.25% 0.45% 0.40%   0.31%
CHF -0.25% -0.11% -0.33% -0.06% 0.14% 0.12% -0.31%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

 

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