James Hyerczyk
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Comex Gold

Gold futures are trading lower shortly before the regular session opening. The range is tight and volume is below average for a second session with most of the major players on the sidelines ahead of the release of the Fed minutes at 18:00 GMT and a key speech by Fed Chief Jerome Powell early Friday.

Traders are continuing to monitor the direction of U.S. Treasury yields, demand for risk and the U.S. Dollar, but the light price action this week suggests they are tentative about taking a large position ahead of the Fed activity. The price action is actually more indicative of position-squaring rather than position-taking.

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At 11:58 GMT, December Comex gold futures are trading $1510.80, down $4.90 or 0.32%.

Fed Minutes in Play

The Fed lowered its benchmark interest rate by a quarter point on July 31 as an insurance policy not against what’s wrong with the economy now, but what could go wrong in the future. It was also the first rate cut by the central bank since 2008.

In approving the rate cut, the Federal Open Market Committee cited “implications of global developments for the economic outlook as well as muted inflation pressures.” The FOMC called the current state of growth “moderate” and the labor market “strong,” but decided to loosen policy anyway.

The minutes are not expected to deviate too much from what the Fed did and what it said in its policy statement. We could actually see a limited reaction in gold to the minutes as traders prepare for Friday’s speech at the central bankers’ symposium in Jackson Hole, Wyoming.

The markets have already fully-priced a quarter-point rate cut next month, and over 100 basis points of easing by the end of next year.

According to IG Markets analyst Kyle Rodda, “The minutes are going to set up a foundation of what to expect, and then Jackson Hole will provide clarity as to whether the Fed is finally coming to the party with potential monetary policy support.”

Gold is in a long-term bull market but from time to time the market will go through periods of profit-taking and position-squaring. Additionally, traders are not always going to chase the market higher. They will spend time looking for value. This being said, I wouldn’t be surprised if we saw a near-term pullback into at least $1479.10 to $1463.30 before moving higher.

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