- Gold almost flat ahead of FOMC minutes.
- All eyes may be now on the deluge of US Treasury auctions later this week.
Gold is now trading around $1332, in the New York session, almost flat for the day, edging up by 0.05% ahead of FOMC minutes later on Wednesday. So far Gold made a session high and low of around 1333-1325 in a day of rangebound trading amid higher USD and concerns of higher US inflation and fiscal deficit.
USD got a boost earlier on Wednesday Asian session on renewed Japanese concern about Yen strength after Japan’s top “FX diplomat,” Asakawa said that “Yen's recent moves have been one-sided”.
On Tuesday, USD was strong on decent auctions of US Treasury (UST) for a deluge of short-term papers worth $179 bln. The 2Y UST auction was a bit stronger than the market was anticipating and could cap Treasury yields for further UST auctions later in the week. But, the USD also came under some pressure on renewed US political jitters after Muller unveiled new charges in Russia-Trump election meddling probe.
All eyes may be now on the FOMC minutes to see if US policymakers pledged to make “further gradual adjustments” in interest rates as opposed to simply “gradual adjustments” at January’s meeting. The market is concerned that the Fed may shift from 3 rates hikes into 4 this year, which may not be good for the Gold.
Increased US government borrowing has applied steady upward pressure on Treasury yields. The Treasury Department has issued more debt in anticipation of a higher deficit from last year's major tax overhaul and a budget deal that will increase federal spending over the next two years.
The USD has been weighed down by a variety of factors this year, including concerns that Trump administration might pursue a weak dollar strategy and the perceived erosion of its yield advantage as other countries start to scale back their easy money policies (QQE). Confidence in the USD has also been shaken by mounting worries over the US twin deficit (fiscal & budget).
Thus, despite higher USD, Gold is being supported by the concern for higher US inflation and higher fiscal deficits coupled with ongoing geopolitical worries.
Technically for Gold, as par various moving averages and a chart pattern, the 1325 area is now immediate support and sustaining below that, the 1315 and 1305-1285 zones may be visible soon. For any meaningful recovery, Gold must stay above the 1356-1366 price zone.
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