Gold prices fall for sixth consecutive day as Fed Minutes suggest a 25 bps cut

• Gold fell as Fed Minutes revealed a “substantial majority” supported a 50 bps cut, while some favored 25 bps.
• The CME FedWatch tool shows lower odds of a 25bps cut to 75.9%, with rising expectations for a rate break.
• The 10-year US 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 a sixth straight day after the Federal Reserve (Fed) released the minutes of its September meeting. The minutes showed that a “substantial majority” of the Federal Open Market Committee (FOMC) supported a cut of 50 basis points (bps). Despite this, XAU/USD is trading at familiar levels near $2,610, down over 0.37%.

The FOMC minutes showed that some officials would have preferred a 25 bps cut, although all participants were in favor of 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 to the upside.

Following the data, CME’s FedWatch tool shows the odds for a 25 bps rate cut were cut to 75.9% from 85.2% a day ago. That means some market participants positioned themselves against the Fed holding interest rates unchanged at 24.1%, up from 14.8% on Tuesday.

U.S. Treasury yields continued to rise, with the 10-year U.S. Treasury note at 4.062%, up five and a half bps. That supported the greenback, which according to the US dollar index (DXY) rose 0.42% to 102.90, its highest level since mid-August 2024.

Traders’ attention now shifts to Thursday’s release of the US Consumer Price Index (CPI). Estimates suggest that inflation will continue to aim lower. However, if inflation is higher than estimates, it will open the door for a pause in the Fed’s easing cycle.

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

Daily Market Reasons: Gold prices pressured by FOMC minutes ahead of US CPI

• US CPI is expected to fall from 2.5% to 2.3% per year. Monthly CPI is expected to come in at 0.1%, down from 0.2%.
• Core CPI is expected to be unchanged from August’s figure of 3.2% year-on-year. September’s figure is expected to fall from 0.3% to 0.2% on the month.
• Other data will reveal initial jobless claims for the week ending October 5. Projections suggest 230,000 new people filed for unemployment benefits, up from the previous figure of 225,000.
• After Friday’s NFP report, Fed officials are more cautious. Vice President Philip Jefferson said his approach is “date by date” and data-driven. Boston Fed President Susan Collins expects more rate cuts, also based on incoming data.
• Recession fears have faded following the latest US jobs report. As a result, most Wall Street banks such as Citi, JPMorgan and Bank of America revised their November Fed call from a 50 bps rate cut to 25 bps.
• 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 lowers as sellers hold below $2,650

Gold prices extended losses below $2,630 and fell to a daily low of $2,605 as traders digested the minutes of the September FOMC meeting.

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

XAU/USD dropped 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 those levels are exceeded, the $2,500 figure is next.

Conversely, if Gold targets higher and recovers $2,650, it will pave the way to challenge $2,670 before the YTD high of $2,685.