Gold rises on FOMC decision expectations

Gold price advances almost 1% as the market speculations accelerated on FOMC’s intention. A WSJ article noted that FOMC members could be split about December’s rate hike, as November increase to the Fed funds rate (FFR) 75 bps, is certain. The precious metal is trading at $1651.36 per ounce at the time of writing

US T-bond yields dropped on Friday, a factor that is seen as supporting gold prices, which eventually bounced off the month’s lows around $1617, advancing steadily towards the $1640s region as US Treasury yields drop after Wall Street Journal’s article.

Fed officials are adjusting the pace of rate increases as they try to cool down inflation. Once the article was published, US equities rallied, and US bond yields retreated, a tailwind for the gold price, as it printed a fresh monthly low early in the session.

The US 10-year T-bond yield is gaining two bps, up at 4.250%, well below the YTD high of 4.338%, a level last seen before the global financial crisis in 2007. Also, US real yields retreated from 1.838% to 1.706% as measured by the US 10-year Treasury Inflation-Protected Securities (TIPS) bond yield, giving a respite to the yellow metal holders.

Friday’s absence of US economic data shifted traders’ focus to remarks by Fed policymakers. On Thursday, Fed’s Lisa Cook commented that the Fed would need to keep increasing rates. Harker commented that he is “disappointed of the lack of progress curtailing inflation,” while he added that he expects rates to be above 4% in 2023.

The US Dollar Index is dropping like a stone, from around 113.94 to 112.90, as speculations of an intervention in the USD/JPY increase, due to the broad trading range depicted by the hourly chart.

The daily chart shows that the Gold Index is still downward biased, though it remains close to the YTD lows of $1614.92. The daily Exponential Moving Averages (EMAs) keep their bearish slope, trading well above the spot price, while the Relative Strength Index (RSI) at 39.86, although it’s aiming higher, remains in bearish territory.

Gold prepares to prolong losses for back-to-back weeks. If the Gold Index breaks $1650, a test of the 20-day EMA is most potential; otherwise, it will be exposed to retest the YTD lows.