- Gold prices are waiting for the FOMC minutes and market reaction.
- Cryptocurrencies are under pressure due to regulatory risk which could be benefitting gold with risk-off flows.
- US dollar stays pressured as markets buy into the Fed’s mantra.
At the time of writing, XAU/USD is trading at $1,879 ad has travelled bid from a low of $1,852.23 to a high of $1,890.14 reaching a 3-month high on Wednesday.
The US dollar is under pressure as traders await April’s Federal Open Market Committee minutes that are widely expected to reiterate policymakers’ intention to stay the course and leave key interest rates near zero for the foreseeable future.
Inflationary concerns, along with a weakening US Dollar index that fell to a 4-month low of 89.688, are helping to keep precious metals elevated. Meanwhile, US Treasury yields were little changed.
Casting minds back to last week, Fed Vice Chair Richard Clarida said that the weak jobs report showed the economy was not strong enough for the Fed to start considering withdrawing its stimulus efforts.
Traders are buying the mantra and gold prices are enjoying the Goldilocks environment with ultra-loose monetary policy and a softer dollar which are a cocktail for higher inflation.
”Gold prices are outperforming against real rates as CTA trend followers continue to cover their shorts,” analysts at TD Securities explained.
”Supportive institutional flows have helped the yellow metal break out from its downtrend, with signs discretionary capital is once again flowing into gold, most recently highlighted by rising ETF flows alongside rising money manager positioning,” the analysts added.
”With investors sounding the alarm over inflation, institutional interest in the precious metals complex is likely to continue rising following months of outflows.”
Nonetheless, the analysts have noted that the gold price is also underperforming against periods of high inflation, which fuels their conviction for upside risks in the yellow metal.
Meanwhile, cryptocurrencies have taken the spotlight, plunging in the wake of regulatory moves from China.
Bitcoin sank like a stone to its lowest level since January and it has now retraced a 61.8% Fibonacci of the bulk of the 2020-YTD rally.
This new sell-off occurred in the wake of China’s decision to ban financial and payment institutions from providing digital currency services.
Gold prices likely picked up a safe-haven bid in the process.
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