International gold prices came under renewed pressure on Wednesday (November 23), but hovered around $1,730 as investors were reluctant to make big bets ahead of the release of the minutes of the Federal Reserve’s November policy meeting. The minutes may strengthen expectations of a slowdown in the rate hike path. Still, the Fed’s eventual peak rate hikes may be slightly higher than expected.
At 15:03 Beijing time, spot gold fell 0.11% to $1,736.17 an ounce; the main COMEX gold futures contract fell 0.08% to $1,736.5 an ounce; the U.S. dollar index fell 0.15% to 107.003.
Edward Meir, an analyst at ED&F Man Capital Markets, said: “The market is a bit nervous ahead of the Fed minutes. In the short term, expect gold prices to move a little bit higher between now and the end of the year because I think the dollar will weaken further and we Very close to peaking in inflation and interest rates.”
The minutes of the Fed’s November policy meeting will be released at 3:00 Beijing time on Thursday (November 24). Earlier this month, the Fed raised interest rates by 75 basis points for the fourth time in a row to curb inflation, the fastest tightening of monetary policy in 40 years.
Fed funds futures are now pricing in at least a 50 basis point rate hike at the Fed’s December meeting, but there is less than a 25 percent chance of a fifth straight rate hike of 75 basis points. Although gold is seen as an inflation hedge, rising U.S. interest rates have sapped the appeal of the non-yielding asset.
Kansas City Fed President Esther George said on Tuesday (November 22) that the central bank may need to raise interest rates higher and keep them there for longer to successfully curb consumer demand and reduce high inflation.
Analysts at TD Securities believe the minutes will reveal what the Federal Open Market Committee (FOMC) thinks of the expected slowdown in the path of rate hikes. “Even so, Fed policymakers will also emphasize that interest rates may end up being slightly higher than previously expected as the labor market remains too tight.”
Strategists at ANZ Bank believe: “Gold’s recovery above the $1,800 resistance level is crucial to confirm the bullish trend for gold. However, given that the Fed is expected to raise interest rates by 50 basis points in December and inflation remains well above target It will be difficult for gold to break through this resistance level before the end of the year. We expect gold prices to hold firm at the support level of $1700, but the price may still test $1620 on the downside, which is the key support level in the near future. Below $1620 Could open the door for gold to fall below $1,600 an ounce.”
Economists at Commerzbank do not expect a sustained rally in gold prices until the first quarter of next year. “Gold prices have fallen sharply again since the end of the dollar’s weak phase. While the latest pullback in U.S. inflation has led to a surge in inflation, which in turn has eased fears that the Fed will continue to aggressively raise interest rates, it is clear that the Fed is not done with tightening monetary policy. After all, Inflation at 7.7% is nowhere near the Fed’s target of 2%. Gold’s latest surge was largely driven by short-covering trades. This price driver is now absent, as the latest CFTC data from the previous reporting week showed, The market shifted to speculative net-long positions. We stand by our expectation that the gold price rally will only be sustained if the rate hike policy is expected to end. This is likely to happen in the first quarter of 2023.”