Gold (XAU/USD) traded around $4,380 during Wednesday’s American session, up nearly 1% on the day, as a softer US dollar and a modest decline in long-term Treasury yields allowed the precious metal to recoup some of the previous day’s losses. The market’s focus now turns to the Federal Reserve’s minutes from the July meeting, due at 18:00 GMT, for clues on the path of interest rates.
What is driving gold today?
The US Dollar Index (DXY) slipped to near 99.28, its lowest since June 5, down 0.37% on the day. A weaker dollar makes gold cheaper for holders of other currencies, supporting demand. Meanwhile, longer-dated US Treasury yields eased slightly, reducing the opportunity cost of holding non-yielding gold, although they remain elevated overall.
The backdrop, however, is mixed. Since the July FOMC meeting, softer-than-expected labour market and inflation data have lowered the probability of a further interest rate hike. According to the CME FedWatch tool, traders now assign only a 32% chance of a September rate increase. This has helped limit gold’s downside. Yet the energy shock from the conflict in the Middle East keeps inflation risks tilted to the upside, reinforcing expectations that the Fed may eventually need to tighten policy further.
Antreas Themistokleous, trading content specialist at Exness, noted that recent softer US data has reduced the likelihood of additional tightening, easing a key headwind for gold. He added that the metal is also benefiting from concerns over rising US government debt, renewed investor demand, and stronger central-bank buying, particularly from China.
Technical outlook: Gold remains range-bound
Gold holds above the 20-day Bollinger simple moving average (SMA) at $4,219, but the near-term tone appears capped. The price sits just below the 100-day SMA at $4,381, which is acting as immediate resistance. The upper Bollinger band at $4,519 marks the top of the current volatility envelope.
The daily Relative Strength Index (RSI) stands at 59, and the Moving Average Convergence Divergence (MACD) histogram remains positive, suggesting limited bullish momentum rather than a clear trend extension. On the downside, a break below recent range support at $4,300 could open the way to the middle Bollinger band near $4,219. The $4,000 psychological level is the next support, followed by the lower Bollinger band at $3,920.
Key takeaways
- Gold rose nearly 1% to around $4,380 as the US dollar weakened and yields pulled back.
- The Fed’s July meeting minutes, due at 18:00 GMT, are the main event risk for the session.
- Market pricing for a September rate hike has fallen to 32% after weaker US data.
- Gold is technically range-bound, with resistance at $4,381 and support at $4,300.
Common questions
Why does gold move inversely to the US dollar?
Gold is priced in US dollars. When the dollar weakens, it takes fewer dollars to buy an ounce of gold, so the price tends to rise. Conversely, a stronger dollar makes gold more expensive for non-US buyers, weighing on the price.
What are the Fed minutes and why do they matter for gold?
The Federal Open Market Committee (FOMC) minutes are a detailed record of the central bank’s latest policy meeting. They provide insight into policymakers’ thinking on interest rates, inflation, and the economy. Since gold is sensitive to interest rate expectations, any hints about future rate moves can move the metal.
How do central banks affect gold prices?
Central banks are major gold holders and active buyers. When central banks add to their reserves, it boosts demand and supports prices. In 2022, central banks bought a record 1,136 tonnes of gold, according to the World Gold Council. Emerging-economy central banks, such as those of China, India, and Turkey, have been particularly active.
For the latest market movements, check the live gold price.
Gold’s near-term direction hinges on the FOMC minutes and ongoing geopolitical developments. With the US economic calendar sparse, traders will parse the Fed’s language for any clues about the timing of the next rate move. Until then, gold is likely to remain within its recent range.