Yesterday (Aug 16th), the Fed published the minutes of the FOMC monetary policy meeting held on July 25-26.
The minutes indicated that the market still believes there is a high probability of a U.S. economic recession occurring before the end of 2024, and it is expected that the overall and core personal consumption expenditure (PCE) inflation rates in the U.S. will not reach 2% until the end of 2025. The Fed may still consider further interest rate hikes in the future and will strive to strike a balance between curbing inflation and ensuring economic stability.
Furthermore, the minutes revealed that although most Fed officials supported an interest rate hike in July, some officials expressed concerns that raising rates too high could be a risk, highlighting a cautious attitude towards further rate hikes. Some officials also expressed concerns that potential price pressures may increase and persist as labor market tightness drives wage increases, making further inflation reduction more challenging.
With positive economic data in the U.S. and the current level of interest rates, the attractiveness of gold to investors continues to decline. Considering that the market expects a pause in rate hikes in September but does not rule out the possibility of another rate hike later this year, high interest rates and expectations of rate hikes provide strong support for the U.S. dollar, and the future trend of gold is likely to continue to decline.
As of August 17th, 18:00, gold has been consistently declining both before and after the release of the FOMC minutes, indicating a prevailing bearish sentiment in the market.
From a technical perspective, on the daily chart, the price of gold has fallen below the $1900 mark and is trading below the 200-day moving average, suggesting a possible reversal of the long-term upward trend in gold.
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