XAU/USD remains poised to test $2,550 with eyes on Fed Minutes

• Gold prices are consolidating recent gains at record highs of $2,532 in Asian trade on Wednesday.
• US dollar and US Treasury bond yields are licking their wounds on dovish Fed expectations amid a risk-free mood.
• Focus remains on Wednesday’s FOMC minutes and Fed Chairman Jerome Powell’s speech on Friday.
• The price of gold will hit new highs as the daily technical setup remains constructive.

Gold prices topped $2,510 in Asian trade on Wednesday, consolidating earlier gains to a new all-time high of $2,532. Gold traders are taking risk aversion into account and refraining from placing new bets ahead of the minutes of the US Federal Reserve’s (Fed) July meeting later on Wednesday.

Gold price tracks more earnings and Fed minutes

The price of gold reversed Monday’s brief correction and bounced back on offers on Tuesday, hitting a new high above the $2,500 level. The US dollar’s downtrend extended alongside falling US Treasury yields on dovish expectations from the US Federal Reserve (Fed) and USD/JPY selling, helping the gold price rebound.

Markets expected minutes from the Fed’s July meeting on Wednesday and Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium on Friday to double down on the central bank’s accommodative stance as disinflation remains ongoing and the US economy resilient . That narrative weighed heavily on the Greenback, even as risk sentiment took a hit.

Wall Street indexes posted their longest rally of the year as markets resorted to profit-taking ahead of Wednesday’s Fed minutes, closely watching the expected annual revisions from the Bureau of Labor Statistics (BLS) and the speech from of Fed Chairman Powell on Friday. .

Bloomberg reported that economists “expect preliminary revisions to the government’s benchmark on Wednesday to show that wage growth in the year to March was at least 600,000 weaker than currently estimated — about 50,000 a month.” .

“Such numbers also have the potential to shape the tone of Fed Chairman Jerome Powell’s speech later in the week in Jackson Hole, Wyoming,” Bloomberg added.

Risk-off flows extend into Asia this Wednesday as all regional indices fall. A steep sell-off in China’s tech stocks is sending Asian stock markets lower. JD.com Inc. fell as much as 12% after a report of a planned sale of Walmart Inc. China’s housing market and growth concerns also continue to haunt markets.

The US dollar cannot capitalize on risk aversion, helping to keep the USD-denominated gold price afloat. A looming Fed rate cut in September and looming geopolitical risks in the Middle East are also pushing the price of gold near all-time highs.

Markets are currently pricing in a 69.5% chance of a 25 basis point (bps) interest rate cut at the Fed’s September policy meeting, with a 30.5% chance of a 50-bps cut basis points, according to CME Group’s FedWatch tool.

Meanwhile, the World Gold Council’s (WGC) latest report said “anecdotal reports suggest there has been strong buying interest from jewelery retailers as well as consumers since the tax cut”. India’s recent cut in import duties on gold has triggered a drop in prices, fueling demand for the shiny metal.

Gold Price Technical Analysis: Daily Chart

The short-term technical outlook for the gold price remains constructive as a symmetrical triangle breakout remains in play.

The 14-day Relative Strength Index (RSI) is holding firm above the 50 level, currently near 66, suggesting that more gains remain in store for the gold price.

If gold buyers recover the record level of $2,532, the next relevant top target is seen at the $2,550 level. Acceptance above the latter could challenge the round level of $2,600 en route to the triangle target measured at $2,660.

However, if the price of gold faces rejection at higher levels, a correction could follow targeting the immediate support seen at the low of $2,486 in months.

A breach of the latter will require a test of the triangular resistance turned support, now at $2,470. Further south, the psychological barrier of $2,450 will challenge bullish commitments.