Gold price drops on high US yields, post Fed Minutes

• Gold declined as Fed Minutes revealed a “substantial majority” backed a 50 bps cut, while some preferred 25 bps.
• CME FedWatch Tool shows lower odds of a 25 bps cut, down to 75.9%, with rising expectations for a rate pause.
• US 10-year Treasury yield rises to 4.062%, supporting the US Dollar.
• Traders await Thursday’s CPI data for further direction on inflation and Fed policy.

Gold extended its losses for the sixth consecutive day after the Federal Reserve (Fed) revealed its September Meeting Minutes. The Minutes showed that the “substantial majority” of the Federal Open Market Committee (FOMC) backed a 50-basis-point (bps) cut. Despite this, the XAU/USD trades within familiar levels near $2,610, down over 0.37%.

The FOMC’s Minutes showed that some officials would’ve preferred a 25 bps cut, though all participants favored lowering interest rates. Regarding the Fed’s dual mandate in both cases, almost all officials saw inflation risks tilted to the downside, while risks to the labor market were on the upside.

Following the data, the CME FedWatch Tool shows odds for a 25 bps interest rate cut were lowered from 85.2% a day ago to 75.9%. This means that some market participants positioned themselves toward the Fed holding rates unchanged, with odds at 24.1%, up from 14.8% on Tuesday.

US Treasury yields continued to rise with the US 10-year Treasury note at 4.062%, up five and a half bps. This underpinned the Greenback, which according to the US Dollar Index (DXY) is up 0.42% at 102.90, its highest level since mid-August 2024.

Now, traders’ focus shifts to Thursday’s release of the US Consumer Price Index (CPI). Estimates suggest that inflation will continue to aim lower. Nevertheless, if inflation comes in higher than estimates, it will open the door for a pause on the Fed’s easing cycle.

The US economic schedule for the week will feature US inflation, US jobs data and Fed speakers.

Daily digest market movers: Gold prices pressured by FOMC’s Minutes ahead of US CPI

• The US CPI is expected to decrease from 2.5% to 2.3% YoY. Monthly CPI is projected to come at 0.1%, down from 0.2%.
• Core CPI is foreseen to remain unchanged compared to August’s figure at 3.2% YoY. The September figure is estimated to dip from 0.3% to 0.2% MoM.
• Other data will reveal the Initial Jobless Claims for the week ending October 5. Projections suggest that 230K new people applied for unemployment benefits, above the prior reading of 225K.
• After Friday’s NFP report, Fed officials are more cautious. Vice-Chair Philip Jefferson said his approach is “meeting by meeting” and data-driven. Boston Fed President Susan Collins expects more rate cuts, also based on incoming data.
• Following the last US jobs report, recession fears faded. Therefore, most Wall Street banks like Citi, JPMorgan and Bank of America revised their November Fed call from a 50 to 25 bps rate cut.
• Meanwhile, the People’s Bank of China (PBoC) halted its Bullion purchases for the fifth month. China’s reserves were unchanged as they stood at 72.8 million troy ounces at the end of last month.

XAU/USD technical analysis: Gold price slips as sellers eye support underneath $2,650

Gold prices extended losses below $2,630 and dropped to a daily low of $2,605 as traders digested the FOMC’s September Meeting Minutes.

Short-term momentum is bearish even though the Relative Strength Index (RSI) shows mixed readings and stands in bullish territory.

XAU/USD has tumbled below $2,620. A breach of $2,600 will expose the psychological $2,550 mark ahead of the 50-day Simple Moving Average (SMA) at $2,537. Once these levels are surpassed, the $2,500 figure is up next.

Conversely, if Gold aims higher and reclaims $2,650, it will pave the way to challenge $2,670 ahead of the YTD high of $2,685.