Gold, Silver on Consolidation Pattern Ahead of FOMC Minutes

How did the Fed decide to cut rates?

Hey FX Emperors, this is the question the whole market is now asking. But not for much time as they will get an answer today because the Federal Reserve will publish its FOMC minutes later in the day. Meanwhile, gold and silver are trading in consolidation mode above key levels.

Overall, market sentiment is just fine as investors welcomed retail store corporate earnings in the United States. Target and Lowe’s published strong quarterly results.

However, traders are now thinking about US President Donald Trump and his comments about Europe.

“Dealing with the European Union is very difficult,” the president told reports at the White House on Tuesday. “They drive a high bargain.”

Investors are now thinking if it is a new chapter of the trade war that the United States is facing against the world. Especially after Trump said that “we have all the cards in this country because all we have to do is tax their cars and they’d give us anything we wanted because they send millions of Mercedes over. They send millions of BMWs over.”

Trump was bragging as the US signed a deal with the European Union earlier this month to boost America’s beef exports.

Awaiting the FOMC minutes

Besides all the noise in markets, what truly matters right now is the FOMC minutes that will be released later in the day.

Experts will be focusing on any hint for new interest rate cuts, how the Fed reached the decision to slash rates, how much influence has Trump’s comments on the Fed decision and what is the outlook of the central bank for the next months.

Besides, traders will pay attention to how the trade war could impact domestic demand in the United States.

Gold trades sideways above 1,500

Gold is trading in consolidation mode after a positive day on Tuesday. However, the movement is confined to a 20 pips range between 1,490 and 1,510 as investors are reluctant to take positions ahead of the FOMC minutes release.

XAU/USD is currently trading at 1,501, falling 0.40% in value so far on Wednesday. Technical conditions are suggesting that a potential downtrend is on the making as the MACD did a bearish cross. However, it is still too soon to say it.

Also, the 1,490 and 1,480 areas are working as strong support for the short term. In the case that gold breaks below those levels, it will find buying zones at 1,440 and 1,400.

On the other hand, fundamentals for gold remains positive as gold purchases by central banks have increased as they want to raise their gold reserved due to geopolitical tensions.

Also, US bond yields have somehow recovered from extreme levels reached last week.

In that framework, if XAU/USD breaks above the 1,510, it will find resistance at 1,530 and 1,540 areas.

Silver trades down on Wednesday on its way to test the 17.20 area

Silver is trading slightly negative on Wednesday as the unit was unable to break above the 17.20 high reached on Tuesday, at least for now.

Currently, it is consolidating levels above 17.00, but below 17.20. As for now, XAG/USD is trading 0.43% negative at 17.10.

Technical conditions suggest that the recovery will be short-lived and a decline is on the table with 16.80 as the first support area. Below there, 16.60 is the next buying zone.

As it is happening with gold, fundamental factors favor, on the other hand, for more gains. In that framework, XAG/USD will face resistances at 17.20, 17.40, and 17.60 areas.