XAU/USD is trading around $4,132 per ounce on the 2-hour chart, with price action remaining within a relatively narrow range ahead of the release of the FOMC meeting minutes early Thursday morning.
Market sentiment is currently mixed. Expectations for a Fed rate hike in October have diminished following weak US employment data and a more moderate PCE reading.
The market currently assigns a probability of around 20.5% to a Fed rate hike in October, while expectations for a hike in December remain higher.
However, the market remains cautious as several Fed officials continue to focus on inflation risks. This makes the FOMC minutes crucial for gauging the extent to which Committee members see a need to maintain a firm stance, even as recent economic data begins to show signs of weakness.
Additionally, the US dollar and bond yields remain key factors influencing gold. The dollar strengthened on Wednesday as investors awaited the FOMC minutes, while US bond yields remained elevated.
Any indication that the Fed remains open to rate hikes could boost the dollar and bond yields, thereby putting pressure on gold. Conversely, a more dovish tone could provide room for gold to recover.
FOMC Minutes: A Key Catalyst
The minutes from the September meeting will be released at 2:00 PM US time on Wednesday (approximately 2:00 AM Thursday, Malaysia time). The primary focus will be on discussions among Fed members regarding inflation, the labor market, and the extent to which further rate hikes are necessary.
XAUUSD chart by Saracen Markets
From a technical perspective, XAU/USD remains in a consolidation phase after failing to sustain a rally toward the $4,170 level. The price is currently hovering near $4,130, with the $4,120–$4,130 area serving as immediate support. If this level holds, there is still room for the price to retest $4,150 and subsequently $4,170.
Conversely, a decisive break below $4,120 could pave the way for a test of the $4,100 level. Therefore, ahead of the FOMC minutes, the $4,120–$4,150 range is a critical zone for gauging the initial price reaction.
For now, gold is awaiting a clearer catalyst. The Fed's tone, along with the reactions of the dollar and bond yields following the release of the FOMC minutes, will be key determinants of whether XAU/USD can break out of its current range or face renewed selling pressure.
