Gold reacts to hawkish FOMC minutes by hovering around $1,850

Gold reacted downwards towards the low $1,840s on the release of the awaited FOMC minutes as US monetary policymakers seem not to expect to cut rates in 2023, Policymakers did not express the size for further rate hikes, either.

Gold price clings to gains around $1850 following the release of the Federal Reserve’s Open Market Committee (FOMC) minutes for the last meeting, which emphasized the need for the central bank to tighten conditions amid stubbornly high inflation levels. At the time of writing, the XAG/USD is trading at around $1,850.

December meeting’s minutes showed that policymakers agreed to slow the pace of interest rate hikes but added that a slowdown is not a “weakening commitment to achieving price stability on that inflation is already on a persistent downward path.” Fed officials added that the US central bank had made significant progress in moving to restrictive policies and added that no rate cuts would be necessary for 2023.

The US dollar Index headed towards 104.409 but retraced some of its gains. The Gold Index slumped below $1,850, extending its drop towards $1,843, though, at the time of typing, it seesaws around the $1,850 figure.

As for Treasury bond yields, which play a big part in the gold price action and direction, the 10-year benchmark note rate sits at 3.709%, falling three and a half bps during the day. Therefore, if XAU/USD holds to gains above $1,850, that could pave the way for a test of $1,900.