XAU/USD sellers take a break ahead of Fed Minutes

• Gold snaps losing streak ahead of Wednesday’s Fed minutes.
• The US dollar holds the upper hand alongside Treasury yields amid China issues and Middle East risks.
• The price of gold appears to be returning to the key support of $2,630 on the back of the bullish daily RSI.

The gold price is taking a break ahead of the release of the minutes of the September US Federal Reserve (Fed) policy meeting later on Wednesday.

Gold price eyes Fed Minutes for fresh boost

In Asian trade on Wednesday, gold prices attempted a tepid comeback, snapping a five-day downtrend. Gold traders are eagerly awaiting the Fed’s minutes to gauge the extent of the next rate cut, especially after Friday’s strong US non-farm payrolls data took bets on a 50 basis point rate cut ( bps).

The Fed’s September meeting minutes will likely show discussions on the labor market and inflation outlook, as well as interest rate developments. Lately, Fed policymakers have continued to deliver dovish messages at their respective appearances, although they have remained non-committal about the size of the next rate cut.

Bets on a smaller Fed rate cut have already weighed on gold prices so far this week, as buyers now appear to lack bullish conviction amid China’s growing economic concerns over the lack of further announced stimulus by China. The Dragon Nation is the world’s largest consumer of the yellow metal, so growing economic concerns could weigh on physical demand for gold from Chinese consumers.

However, the safe-haven gold price continues to find “buy low” demand as rising tensions between Israel and Iran raise the risk of the conflict turning into a wider regional war.

Reuters reported early Wednesday that Israeli Prime Minister Benjamin Netanyahu said Israeli airstrikes had killed two successors to Hezbollah’s slain leader, as Israel expanded its ground offensive against the Iran-backed group with a fourth army division deployed in southern Lebanon.

Ahead of the Fed minutes, gold prices could find some trading stimulus from speeches by Fed Vice Chairman Philip Jefferson and San Francisco Fed President Mary Daly. Fed official Jerfferson said earlier that the decision to cut rates by 50 basis points in September “was timely and consistent” with the Fed’s twin mandates of achieving 2 percent inflation and a maximum level of employment.

Gold Price Technical Analysis: Daily Chart

The gold price outlook remains constructive from a near-term technical perspective, even as buyers broke the key static support at $2,630 on a daily-close basis.

The 14-day Relative Strength Index (RSI) is in a recovery mode while holding above the median line, currently near 56. This suggests that a rally in the gold price may be in store.

On the downside, the 21-day simple moving average (SMA) at $2,619 needs to be defended to revive the upward trajectory to record highs.

Failure to do so will recall the sellers, triggering a further selloff in the gold price towards the $2,600 mark. Further downside pressure could target the September 20 low of $2,585.

On the other hand, gold price needs a daily candlestick close above the psychological barrier of $2,650 to retake the lifetime high of $2,686.

Before that, strong resistance near $2,670 will come into play.