Gold surges on Fed’s pivot signals by FOMC minutes

Gold prices extended gains on Wednesday as the FOMC minutes for November policy meeting showed a “substantial majority” of members opting to slow down rate hikes. Spot gold rose 0.6% to $1,750.38 per ounce, while US gold futures settled 0.6% higher at $1,750.90.

Gold traded higher in a relief rally after the Fed minutes contained no hawkish surprises, rather te minutes are viewed as more dovish and just about confirmed the pace of hikes would drop to 50 bps in December. The financial markets are convinced the Fed is overtightening so it is dovishly interpreting the minutes which contains no real surprises given Fed commentary the past two weeks.

A slower pace would better allow the Federal Open Market Committee to assess progress toward its goals of maximum employment and price stability, as per the Fed’s Nov. 1-2 meeting minutes.

Knowing that the bulk of those interest rate hikes are already factored into the market, observers would say there is no longer a dark cloud of interest rate hikes looming over the gold market.

Higher rates increase the opportunity cost of holding non-yielding gold. Also helping gold, the dollar was down, making gold cheaper for holders of foreign currencies, while benchmark treasury yields were also lower for the day.

Data-wise, US business activity contracted for a fifth straight month in November, with a measure of new orders dropping to its lowest level in 2-1/2 years as higher interest rates slowed demand.

Gold prices were cautious earlier on Wednesday with investors eyeing the release of FOMC minutes from the US Federal Reserve’s November policy meeting for guidance on the central bank’s rate hike expectations.

Technically, gold futures bulls and bears are on a level overall near-term technical playing field. A fledgling price uptrend on the daily bar chart has been negated. Bulls’ next upside price objective is to produce a close above solid resistance at the November high of $1,791.80. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,675.00. First resistance is seen at this week’s high of $1,755.00 and then at $1,770.00. First support is seen at $1,725.00 and then at today’s low of $1,719.00. Wyckoff’s Market Rating: 5.0.