Gold Price Under Pressure As Traders Digest FOMC Minutes

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

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 territory upon the release of the FOMC 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.

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 Kremlin said on Wednesday that peace talks between Moscow and Kyiv were not progressing as rapidly or energetically as it would like. Russia has accused the West trying to derail peace talks with Ukraine by fueling “hysteria” over allegations of war crimes by Moscow’s forces following their retreat from the Kyiv region.

Kyiv and the West say there is evidence, including images and witness testimony gathered by Reuters and other media organizations, that Russia committed war crimes in the Ukrainian town of Bucha. Moscow denies the charge and has called the allegations a monstrous forgery.
“The only thing I can say is that work (on the talks) is continuing,” Kremlin spokesman Dmitry Peskov told reporters on a conference call when asked about the prospect of another round of negotiations between Moscow and Kyiv.

“There is still a long road ahead. The work process is ongoing but it is dragging along the way more than we would like.”

Russian sanctions, supportive of USD
The news at the start of this week of further sanctions from the US and the EU on Russia which will not be cost-free, particularly for the Eurozone economy, is another factor to consider which can help to support gold prices. While these have serious implications for EUR, which will likely see the US dollar supported, risk-off flows into gold could offset the gains in the greenback.

However, default risk has risen for Russia. Today, Russia said foreign banks declined to process 649.2 million US dollar of coupon payments after the Treasury Department banned Russia from making any debt payments through US banks. The ramifications of such a shortfall of liquidity in the money markets would be expected to drive up further real demand for the US dollar.

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.