Gold: FOMC minutes barred the gates for buyers around $1347

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  • Gold remains around $1338 before the Asian markets open on Thursday.
  • The yellow metal dropped nearly $10 after the FOMC minutes conveyed a less dovish message.
  • $1347 and $1356 can offer immediate resistance while $1326 can act as nearby support for the bullion.

Gold prices trade near $1338 ahead of the Asian opening on Thursday. The yellow metal declined late Wednesday as minutes of the Jan 29-30 FOMC meeting conveyed a less dovish message than anticipated by the market and triggered knee jerk reaction for the USD buyers. That said, the bullion traders reversed earlier gains from $1347. However, some of the high-risk events like developments surrounding Brexit and the US-China trade talks are still in the pipeline and can entertain safe-haven traders going forward.

Minutes of the January 29-30 Federal Open Market Committee (FOMC) meeting reiterated Fed’s rate hold amid uncertain economic outlook but also conveyed that several participants saw further rate-hikes appropriate in 2019. The minutes additionally said that the majority of the FOMC members support to announce a plan to stop reducing the Fed’s asset holdings later this year. The message went like a bullish note to the markets giving quick gains to the US Dollar and negatively affecting safe-havens like the Gold and the Japanese Yen (JPY).

While Gold prices have already witnessed pullback from $1347, the move can’t be considered as a reversal due to a few top-tier risk events that still highlights the importance of risk aversion. Notable among them are Chinese Vice Premier Liu He’s arrival to Washington for high-level trade talks and on-going Brexit developments ahead of the deal March 29 deadline.

Liu He, a key aide to the Chinese President Xi Jinping, will be in Washington during February 20 and 21 to escalate the trade negotiations that have an expiry of March 01. During the recent round of talks when the US delegated were in Beijing, few details of the developments were shared with the world while terming the talks as progressive. Back home, the US diplomats are discussing plans to levy additional pressure on China to offer property right protection and economic restructuring while also signaling the need for the Yuan manipulation to benefit the USD.

At the Brexit front, a meeting between the UK Prime Minister Theresa May and the EU Commission chief Jean-Claude Juncker concluded with the positive note. Both the leaders agreed to hold another round of discussion before the month-end while marking constructive talks on Irish backstop.

Although FOMC minutes conveyed a bit less dovish message than market anticipation, uncertainty surrounding the US-China trade talks considering tough demands from the US, coupled with Brexit threat, can keep highlighting the Gold’s demand for the risk aversion.

Gold Technical Analysis

Positive divergence by the 14-day relative strength index (RSI) on a daily chart shows prices marking highs and the RSI registering lows, which in turn favors the Gold’s further upside. However, a break of $1347 is required to aim for $1356 and $1360.

Alternatively, $1326 and $1312 are near-term important supports for the bullion prices.

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