- Gold fell after the Fed minutes revealed a "substantial majority" favored a 50 bps rate cut, while some preferred a 25 bps reduction.
- The CME FedWatch Tool shows reduced odds of a 25 bps cut, now at 75.9%, with growing expectations for a rate pause.
- The U.S. 10-year Treasury yield climbed to 4.062%, boosting the U.S. dollar.
- Traders are now focused on Thursday's CPI data for more insight into inflation and the Fed's policy direction.
Gold extended its losing streak for the sixth consecutive day after the Federal Reserve released its September meeting minutes. The minutes revealed that a "substantial majority" of the Federal Open Market Committee (FOMC) supported a 50-basis-point (bps) rate cut. Despite this, XAU/USD remains within familiar territory, trading near $2,610, down 0.37%.
The FOMC minutes also noted that some officials preferred a 25 bps cut, though all participants agreed on lowering rates. Most officials viewed inflation risks as tilted to the downside, while labor market risks were seen as skewed to the upside.
Following the release, the CME FedWatch Tool showed a decline in expectations for a 25 bps rate cut, dropping from 85.2% to 75.9%. As a result, some traders are now betting on the Fed keeping rates unchanged, with odds rising to 24.1%, up from 14.8% the day prior.
U.S. Treasury yields continued to climb, with the 10-year Treasury note reaching 4.062%, up five and a half basis points. This bolstered the U.S. dollar, as reflected in the U.S. Dollar Index (DXY), which rose 0.42% to 102.90, its highest level since mid-August 2024.
Traders now turn their attention to Thursday's U.S. Consumer Price Index (CPI) report. Inflation is expected to continue trending lower, but if the data comes in higher than anticipated, it could lead the Fed to pause its easing cycle.
Daily Market Movers Digest: Gold Prices Under Pressure from FOMC Minutes Ahead of U.S. CPI
- U.S. CPI is forecast to decline from 2.5% to 2.3% YoY, with monthly CPI expected to drop to 0.1% from 0.2%.
- Core CPI is anticipated to remain steady at 3.2% YoY, with a slight dip in the monthly figure from 0.3% to 0.2%.
- Initial Jobless Claims for the week ending October 5 are projected at 230K, up from the previous 225K.
- Fed officials remain cautious after last week’s NFP report. Vice-Chair Philip Jefferson emphasized a data-driven, "meeting by meeting" approach, while Boston Fed President Susan Collins expects more rate cuts, also depending on incoming data.
- With recession fears fading after the latest jobs report, major Wall Street banks like Citi, JPMorgan, and Bank of America have revised their November Fed expectations from a 50 bps cut to 25 bps.
- Meanwhile, the People’s Bank of China (PBoC) paused its bullion purchases for the fifth consecutive month, leaving its reserves unchanged at 72.8 million troy ounces at the end of last month.
XAU/USD Technical Analysis:
Gold continued to slide below $2,630, hitting a daily low of $2,605 as traders absorbed the FOMC minutes.
In the short term, momentum is bearish, though the Relative Strength Index (RSI) remains mixed and in bullish territory.
XAU/USD has broken below $2,620, with further declines potentially targeting the psychological level of $2,550 and the 50-day Simple Moving Average (SMA) at $2,537. If these levels are breached, the next support lies around $2,500.
On the upside, reclaiming $2,650 could set the stage for a challenge of $2,670, with the year-to-date high of $2,685 as the next major target.
