Gold falls modestly, trades below $1256 as US Dollar gains traction on FOMC minutes

• The FOMC’s statement doesn’t offer any surprises.
• US Dollar Index erases its daily losses to turn flat near 94.20.
• Wall Street retraces upside, remains in the positive territory.

The XAU/SD pair recorded small losses after the USD started to gather strength on the back of the FOMC minutes. As of writing, the pair was trading at $1255.80, down around $1 on the day.

According to the FOMC’s statement,  the Committee sees further gradual increases in the policy rate would be consistent with the sustained economic expansion and repeats that it will continue to assess the realized and expected economic conditions relative to its full employment and 2% inflation targets. The US Dollar Index quickly erased its daily losses and turned flat near 94.20 but lacked a follow-through amid a lack of any new information on the monetary policy outlook.

Regarding the Trump administration’s trade policy, Committee members voice their concerns over possible adverse effects of tariffs on the economic activity and future investment decisions. Furthermore, most participants noted that the uncertainty and risks associated with trade policy had intensified.

Major equity indexes in the U.S. reacted negatively to these comments and both the Dow Jones Industrial Average and the S&P 500 retraced some of their recent gains. The DJIA added as much as 0.8% earlier in the session and was last seen up 0.5%. The cautious  tone seems to have weighed on the market sentiment, which allows gold to stay resilient against the buck.

Technical outlook

 The first technical resistance for the pair could be seen at $1260 (Jul. 4 high) ahead of $1267 (20-DMA) and $1272 (Jun. 24 high). On the downside, supports are located at $1250 (daily low), $1245 (Jun. 28 low) and $1239 (Jul. 2 low). Meanwhile, the CCI indicator on the daily chart is moving sideways near the 0 mark, pointing to a neutral price action in the short-term.