Gold prices dipped slightly on Wednesday (Aug 21) as the Fed meeting minutes brought no surprises, and investors awaited Fed Chair Jerome Powell’s upcoming speech. The weakening US dollar continued to provide tailwinds for the precious metal, keeping it firmly above the key $2,500/oz level.
At the close of New York trading, spot gold dipped by $2/oz from the previous session’s close, or 0.08%, to $2,512.50/oz, according to Kitco data.
As of 8 a.m. Vietnamese time today (Aug 22), spot gold in Asian trading rose by $1.4/oz from the US close, or 0.06%, to $2,513.90/oz. Converted at Vietcombank’s selling rate, this is equivalent to about VND 76 million per tael.
The July Fed meeting minutes released on Wednesday showed policymakers believed a rate cut in September was more likely. Most meeting participants judged that a monetary policy easing would be appropriate if the economy evolved as expected.
According to the FedWatch Tool from CME Group, federal funds futures traders continue to price in a 100% probability of a Fed rate cut in September. Of this, a 0.25 percentage point reduction is priced at 65%, while a 0.5 percentage point cut is at 35%.
The current spot gold price is not far from the record high of $2,531.6/oz reached on Tuesday.
“Gold prices remain elevated after the Fed minutes showed most FOMC members were prepared for a September rate cut. I am cautiously optimistic as this is not really new news. Gold prices could continue to edge higher but are unlikely to accelerate sharply without a surprise catalyst,” said independent precious metals analyst Tai Wong in New York, quoted by CNBC.
Following the Fed minutes, the US dollar continued to hit a new low in nearly eight months, and the 10-year US Treasury yield fell to its lowest level in more than two weeks. Declining yields and a weaker dollar are important factors supporting gold prices at this time, in addition to the expected Fed rate cut.
The Dollar Index, which measures the greenback’s strength against a basket of six major currencies, closed at 101.04, down from 101.44 in the previous session. The yield on the 10-year US Treasury note fell more than 2 basis points to 3.797%.
“The probability of gold prices rising in the future is higher than that of falling, unless there is an unexpected shift in the Fed’s policy direction. With the Fed about to enter a rate cut cycle, the door has been opened for gold prices to continue their upward trajectory,” said analyst Gary Wagner, author of the daily gold price forecast “The Gold Forecast,” in an interview with Kitco News.
Experts believe the US dollar is testing the support level of 101 after falling more than 2% since the beginning of the month. Shivaan Tandon, an economist at Capital Economics, predicts the greenback will continue to slide, providing solid support for gold’s upward trend. Capital Economics expects the Dollar Index to fall to 98 by the end of 2025.
However, not all experts believe gold prices can easily reach new highs.
“Market expectations for the Fed to cut rates may have gone too far, and this overextension will eventually put downward pressure on gold,” said Swissquote Bank senior analyst Ipek Ozkardeskaya.
“Expectations for Fed dovishness may have been overpriced into gold. There are signs that gold is falling into the overbought zone. A correction may be reasonable for gold at this point,” Ozkardeskaya stated.
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