· Gold looks to the Fed's minutes
Gold investors will be looking at the FOMC minutes carefully on Wednesday to get a clue for gold's near term direction. The factors weighing on gold recently have been a dollar which has been bouncing off the 92.00 region and a coronavirus vaccine hope. The hope of the vaccine resulted in US10 year yields spiking higher towards 1.00% around Nov 09 and sparked the biggest daily loss in gold futures 7 years. It also prompted outflows in ETF holdings.
So, gold has two narrative to balance.
The sellers narrative
A vaccine is on the way and with it normality and a return to rising rates, albeit eventually. Gold can be sold.
The buyers narrative
Low interest rates are here for years and record QE purchases will keep the appeal of gold alive over the longer term. Plus physical demand should pick up for the Lunar New year as China starts buying gold again.Gold can be bought
The minutes in focus
The Fed's minutes will be viewed with scrutiny tonight due to the disagreement between Secretary Mnuchin and Fed Chair Jerome Powell over whether to preserve emergency lending programs which makes the prospect of further stimulus uncertain. So, if the US Gov't and the Fed are seen to be not coming to rescue the US economy then expect more bear term gold sellers.
· Gold Price Analysis: XAU/USD stages a modest recovery from multi-month lows
Gold edged higher during the early European session and was last seen trading near the top end of its daily range, just below the $1815 level.
The precious metal managed to find decent support near the $1800 mark, just ahead of a technically significant 200-day SMA and for now, seems to have stalled its recent downward trajectory. Sustained US dollar selling bias extended some support to the dollar-denominated commodity and prompted some short-covering amid near-term oversold conditions.
Investors also seemed inclined to lighten their bearish bets ahead of Wednesday's top-tier US macro releases and the latest FOMC meeting minutes. That said, the upside is more likely to remain capped amid the optimism over the progress toward remedies for COVID-19, which has been undermining demand for traditional safe-haven assets, including gold.
This makes it prudent to wait for some strong follow-through buying before confirming that the XAU/USD has found a near-term bottom and positioning for any further appreciating move.
Market participants now look forward to a flurry of top-tier US macro data for some short-term trading opportunities. Wednesday's US economic docket highlights the releases of the preliminary (second estimate) GDP report, Durable Goods Orders, Initial Weekly Jobless Claims and final Michigan Consumer Sentiment Index for November.
The key focus, however, will be on the latest FOMC meeting minutes, which will be scrutinized for the possibility of any further policy easing by the Fed in December. The Fed's policy outlook will play a key role in determining the next leg of a directional move for the non-yielding yellow metal.
· Gold: Technical setups remain in favor of sellers
“The yellow metal is set to extend the bearish momentum, in response to the shift in the market’s perception towards the riskier assets. Attention turns towards a batch of critical US economic data and FOMC minutes due on the cards later in the day for fresh cues.”
“Looking at the daily chart, the 14-day Relative Strength Index (RSI) trends in the bearish region but not oversold yet, suggesting that there is more room to the downside. Acceptance below the critical 200-daily moving average (DMA) support at $1798 could trigger a sharp drop towards the May 18 high of $1765. Meanwhile, the bearish bias remains intact so long as the metal stays below the fierce support now resistance at $1850.”
“Gold has confirmed a bear flag breakdown on the hourly sticks earlier in the Asian session. The price now attempts a bounce along with the hourly RSI. But the bulls are likely to face stiff resistance at the confluence of the pattern support and bearish 21-hourly moving average (HMA) at $1808. Further up, the pattern resistance at $1814 could be challenged. To the downside, sellers will aim for the measured target at $1777 on a breach of the crucial support around $1800-$1798 levels.”
Reference: FXStreet
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