Gold Price Holds Firmly Despite Hawkish FOMC Minutes

Gold price is under pressure on Wednesday but contained within a familiar range as it continues to trade sideways on the daily chart. Gold is trading at $1,922.10, XAU/USD; down by 0.06% and has travelled between a $1,933.58 high and a $1,915.08 low.

Gold price is firming up in what is considered to be a knee-jerk bout of small-time volatility following the FOMC minutes that proved hawkish. The US Dollar Index leapt to the highest level in 2022 at 99.769 following the Minutes that showed that the US central bank policymakers expressed anxiety about inflation.

The FOMC finalized its plans to shrink bond holdings in an aggressive effort to curb rising prices. The Fed is preparing to shrink the $9tn balance sheet at a pace of roughly $95bn a month. Several FOMC members “noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified,” the minutes said.

The US dollar quickly reversed course to the said highs, but despite that the FOMC won’t hesitate to deliver one or more half-point rate hikes, the dollar is consolidating the fans and has moved in on the 99.60s.


For that, US Treasury yields rose and stock indexes fell sharply today ahead of the release of the minutes. 30 minutes before the release of the minutes, the yield on 10-year Treasury notes was up 1.84% at 2.60%. The Dow Jones Industrial Average fell 0.6%, the S&P 500 lost 1.17% and the Nasdaq Composite dropped 2.38%.

The US dollar was flat to slightly higher on Wednesday, as measured by the DXY index and vs a basket of currencies. In early-morning trading, the dollar index eased to 99.313, but has since climbed back to 99.54 to trade slightly in the green in the count down to the Federal Open Market Committee minutes. On Tuesday, the index touched its highest since May 2020 at 99.759.

The sharp gains were made the previous session following hawkish comments from one of the Federal Reserve’s top officials. On Tuesday Fed’s Lael Brainard, usually a more dovish policymaker, said she expected a combination of rate increases and a rapid balance sheet runoff to bring US monetary policy to a “more neutral position” later this year. Her comments sent both US yields and the dollar on a tear, slightly weighing on the price of gold that remains supported above the psychological $1,900 round number in sideways consolidation.

At the Fed’s last meeting, it raised rates for the first time since 2018 and pivoted from an easy monetary policy to battle the effects of the coronavirus pandemic to a more aggressive stance on fighting inflation. Meanwhile, the minutes of the FOMC’s March meeting is expected to provide fresh details on its plans to reduce its bond holdings.

Geopolitically, the Kremlin said on Wednesday that peace talks between Moscow and Kyiv were not progressing as rapidly or energetically as it would like.

Technically; gold price has been making a base for itself on the daily time frame at a prior structure as marked up on the chart above. The weekly 61.8% ratio has held as support and the price has been accumulating above there and in the low $1,900s ever since. A catalyst will be needed to see the price breakout of its sideways range with a bias to the upside while holding above the weekly 61.8% ratio.