Gold price extends losing streak amid US dollar optimism ahead of FOMC Minutes

• The price of gold is falling further as the Fed’s 50bps rate cut bets have strengthened the attractiveness of the US dollar.
• The decline in the price of gold is expected to be limited due to geopolitical tensions.
• Investors await FOMC minutes and US inflation data for September.

The price of gold (XAU/USD) extended its losing streak for a sixth straight trading day on Wednesday. The precious metal was hit by the upbeat US dollar (USD), which strengthened as traders discount another higher-than-usual Federal Reserve (Fed) interest rate cut by 50 basis points (bps) in the next their meeting in November. .

The U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, extended its gains to near 102.70. An appreciation of the US dollar makes investing in the price of gold an expensive bet for investors.

Meanwhile, US 10-year Treasury yields fell to nearly 4.02% in the European session on Wednesday, but are nearing a more than two-month high. Higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets such as gold.

Traders priced in bets on a big Fed rate cut as upbeat United States (US) non-farm payrolls (NFP) data for September eased the risk of an economic slowdown. The US jobs report showed that job demand remained robust, the unemployment rate decelerated and wage growth was stronger than expected.

However, the decline in gold prices is expected to remain limited due to rising tensions in the Middle East region. The war between Israel and Iran-backed Hezbollah intensified after the former killed Hezbollah leader Hassan Nasrallah and his subsequent replacements. Historically, the attractiveness of precious metals such as gold has improved amid geopolitical issues.

Daily Market Reasons: Gold Price Falls as US Dollar Extends Higher

• Gold prices are expected to remain on tenterhooks as investors focus on the Minutes of the September Federal Open Market Committee (FOMC) meeting, which will be released at 18:00 GMT. The FOMC minutes will provide a detailed explanation behind the sharp interest rate cut and new clues about inflation and the economic outlook.
• At its September meeting, the Federal Reserve began its policy easing cycle after maintaining a tight policy stance for more than two and a half years. Fed officials almost unanimously (with only Michelle Bowman against) voted for a sizeable 50bps rate cut as they were more concerned with reviving job growth, confident that inflation is on track to sustainably return to target the bank of 2%.
• This week, investors will pay close attention to US consumer price index (CPI) data for September, which will be released on Thursday. Economists estimate that the annual core CPI – which excludes volatile food and energy prices – rose steadily by 3.2%. The annual CPI is expected to decelerate further to 2.3% from 2.5% in August.
• Inflation data will significantly influence market expectations about the Fed’s interest rate outlook for the rest of the year. According to CME’s FedWatch tool, 30-day Federal Fund Futures price data shows there will be a 25bps rate cut in each of the two remaining meetings this year.

Technical Analysis: Gold price drops to near $2,610

Gold price extends correction to near $2,610 from all-time high of $2,685 as profit booking remains intact. However, the overall gold price trend remains bullish as the 20- and 50-day exponential moving averages (EMAs) at $2,615 and $2,550, respectively, are on the higher side.

The uptrend line from the April 12 high of $2,431.60 will act as major support for the gold price upside.

The 14-day Relative Strength Index (RSI) is in the 40.00-60.00 range, suggesting weakening momentum. However, the uptrend remains intact.