Gold Upbeat on Weaker Dollar after the Fed Minutes

  • XAUUSD
    (${instrument.percentChange}%)

XAU/USD Analysis

The precious metal had dropped last week from overbought levels - as we had warned in our last analysis - and started the current one on the back foot. However, it quickly found renewed buying interest, as investors dumped the USDOLLAR after Wednesday poor PMI's and Fed minutes.

The accounts of the last policy meeting were viewed as dovish by the markets, since they revealed that "a substantial majority of participants" believe that a moderation in the pace of rate hikes "would likely soon be appropriate", even though officials see higher terminal rate than previously expected. [1]

CME's Fed Watch Tool prices in a 50 basis points hike in December with a roughly 75% probability, at the time of writing [2]. This would constitute a downshift for the Fed, after four consecutive 75 bps increases.

The recent slide from overbought levels was limited and has given XAU/USD the chance to muster renewed strength, for a push towards 1,808-14. An advance beyond this level though, which would bring 1,880 in the spotlight, may require fresh catalyst.

XAU/USD has failed to stay above the 200Days EMA and this puts it in an uncertain position. As long as it does not break fresh ground, there is risk for pressure towards the critical 1,721-1,708 region, which includes the 38.2% Fibonacci of the November rally, the EMA200 and the upper border of the daily Ichimoku Cloud. This area can support the precious metal, but daily closes below it would expose it to the lower part of the cloud.

Wall Street will remain closed today and will close early on Friday, due to the Thanksgiving holiday, also affecting the trading hours of XAU/USD and other products. Given this, caution is needed around liquidity/volatility conditions.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 24 Nov 2022 https://www.federalreserve.gov/monetarypolicy/fomcminutes20221102.htm

2

Retrieved 30 Nov 2022 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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