Gold sinks after FOMC minutes

XAU/USD reacts with a sharp drop, testing the S1 daily pivot point, while US Treasury yields and the greenback see upward movement. Fed officials unanimously aim to achieve the 2% inflation target, but divisions emerge on the path forward.

Gold price struggles after the latest Federal Reserve’s meeting minutes showed board officials were split between raising rates or keeping them unchanged at the July meeting. After the data release, XAU/USD trades volatile, hit a fresh 7-week low at $1,892.54 as at the time of writing, and is seesawing at around the $1,900-$1,890 area.

XAU/USD seesaws around the $1,900 mark as Federal Reserve minutes reveal split opinions on monetary policy. The minutes revealed a unanimous determination among all Federal Reserve officials to persist in their objective of lowering inflation to the targeted 2%, while most participants assessed that upside risks on inflation would require additional tightening.

However, a division within the Fed board became evident regarding monetary policy, as a “few” members advocated for maintaining the existing interest rates. Among them, Atlanta’s Fed President Raphael Bostic consistently voiced his stance in favor of unchanged rates.

The minutes showed that while the economy has displayed resilience, concerns persist about potential downsides to economic activity and possible risks of an increase in the unemployment rate.

Federal Reserve officials agreed that forthcoming rate decisions would be based on a comprehensive assessment of incoming data while adopting a cautious approach in the upcoming months.

As the minutes were released, the Gold Index dropped sharply towards the S1 daily pivot point at $1,894.89 and bounced off that level. At the same time, US Treasury bond yields climbed with the 10-year benchmark note edging toward 4.246%, while the greenback hit a daily high of 103.457 before trimming some of its gains.

If XAU/USD achieves a daily close below $1,900, that could expose March’s 13 daily low of $1,867.17 as the next support, ahead of dropping towards the latest swing low of $1,809.48. Contrarily, if buyers reclaim $1,900, that could expose the 50-hour Moving Average (HMA) at $1,904.34, slightly above the daily pivot point.