Gold Prices Forecast: XAU/USD Slips as Investors Await Fed Minutes

Gold Prices Lower as Fed Minutes Awaited

Gold prices slipped on Wednesday as traders await the release of the Federal Reserve’s latest policy meeting minutes. These minutes are expected to provide further insights into the timeline for potential interest rate cuts, a critical factor for the precious metal’s market.

At 11:00 GMT, XAU/USD is trading $2414.79, down $6.235 or -0.26%.

Consolidation After a Strong Run

Gold is currently consolidating after a significant rally. Short-term potential for higher prices seems limited without additional support from the dollar. The market remains robust, with a buy-on-dip mentality prevailing among investors.

Fed’s Stance on Rate Cuts

Minutes from the Fed’s May policy meeting are due at 18:00 GMT. Recent economic data indicates a downtrend in inflation, but Federal Reserve officials recommend waiting several more months before cutting rates. Higher interest rates increase the opportunity cost of holding gold, an asset traditionally viewed as an inflation hedge.

Rising Treasury Yields and Fed Comments

U.S. Treasury yields rose on Wednesday following comments from several Federal Reserve speakers. These officials emphasized patience, noting that inflation remains above the Fed’s 2% target. Fed Governor Christopher Waller stated the need for more data showing easing inflation and economic conditions before supporting rate cuts.

Market Reaction

Investors are currently adjusting their rate cut expectations, with markets pricing in about 43 basis points of easing compared to last week’s 52 basis points. The PCE data due on May 31 will be crucial for confirming inflation trends. As traders await further Fed guidance, the market outlook for gold remains constructive, supported by ongoing central bank buying and cautious optimism for continued economic stability.

Market Forecast

In the short term, gold prices are likely to remain under pressure as traders digest Fed minutes and economic data. However, the underlying demand from central banks and a potential easing of inflation could support a bullish outlook in the medium term. Traders should watch upcoming economic indicators and Fed comments closely for signs of policy shifts that could impact gold prices.

Technical Analysis

XAU/USD is down for a second session on Wednesday. Despite the drop, the short-term, intermediate, and long-term uptrends remain intact.

Breaking above the record high at $2450.125 will signal a resumption of the uptrend and could propel prices towards the psychological $2500.00 level.

On the downside, falling below $2414.715 will mark a weekly decline. With traders in “buy the dip” mode, buyers are likely to step in at this level. However, a close below this mark on Friday could significantly impact investor sentiment heading into next week.