Gold fell sharply after the release of the minutes from the September Fed meeting. By the end of Wednesday, XAU/USD had lost about 1.16% and was finishing the day around $4,115. During the session, the price dropped to $4,066, and by Thursday morning the metal was trading around $4,110.
What happened after the Fed minutes
The main pressure factor was the more hawkish tone of the discussion within the Fed. The minutes showed that the September rate hike received broad support. Many participants viewed it as additional protection against inflation, which continues to remain above the regulator's target. Most participants also consider another rate hike before the end of the year appropriate.
Why this is bad for gold
Gold does not generate interest income. When rates and bond yields rise, investors get higher returns in dollar-denominated instruments. Against this backdrop, holding gold becomes less attractive relative to bonds and other interest-bearing assets. Additional pressure comes from the strong dollar, since gold is denominated in the American currency.
The dollar and bonds amplified the move
The DXY dollar index rose by about 0.40%, to 102.24. The yield on 10-year US Treasuries rose intraday to 5.365%. This is one of the highest levels in roughly 24 years. By the close, the yield was around 5.27%. The combination of a strong dollar and expensive US debt became the main external pressure factor on gold.
What Fed officials say
Kansas City Fed President Jeffrey Schmid spoke in favor of further policy tightening. He also noted that the development of artificial intelligence could become an additional source of inflationary pressure. San Francisco Fed President Mary Daly took a more cautious position and emphasized that further decisions depend on incoming economic data. This shows that differences remain within the Fed in assessing the future path of the rate.
Central banks continue to buy gold
Despite the price decline, demand from central banks remains high. The People's Bank of China increased its gold reserves for the 23rd month in a row. In September, purchases amounted to about 23 tonnes. This remains one of the factors of long-term support for the market, even despite short-term pressure from rates and the dollar.
Where the nearest levels are
The nearest support zone is around $4,070. On the upside, $4,200 remains important resistance. The next technical reference point runs around $4,267, where the 100-day moving average is located. The RSI on the daily chart has declined to about 37, approaching oversold territory. This indicates strong seller pressure, but so far does not confirm a reversal.
What's next
The futures market estimates the probability of a rate hike in December at about 78.3%. At the October meeting, most participants expect a pause. The nearest macroeconomic reference points will be weekly US jobless claims and the University of Michigan consumer sentiment index. If the data again support expectations of a hawkish Fed policy, pressure on gold may persist.
Were you in gold when the Fed minutes came out?
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