levels to watch with the Fed meeting minutes in focus

Gold price is in the green for the fifth consecutive session amid the pullback in the US dollar. Even so, its gains will likely be curbed in the short term by a strong US dollar and high Treasury yields amid a hawkish Fed.

What’s driving gold price?

 In the ensuing sessions, the market will be reacting to the FOMC meeting minutes scheduled for release on Wednesday.

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 With consumer prices having risen to a four-decade high and the labor market remaining strong, the Federal Reserve is keen on aggressively tightening its monetary policy. While gold is a conventional hedge against inflation, high interest rates tends to weigh on the non-yielding asset.

So far the US central bank has hiked rates by 75 basis points. Investors expect it to increase it further by 50 basis points in its June and July meetings.

From this perspective, the gold price gains recorded in recent sessions are not necessarily founded on investors’ outlook of the expected Fed meeting and the bank’s broader position on inflation. After hitting a 20-year high of $105.04 about two-weeks ago, profit-taking and an overall risk-on sentiment has pushed the dollar index to $102.01 as at the time of writing.

At the same time, the decline in Treasury yields has further boosted gold price. The benchmark 10-year yields is at 2.81% after hitting an over three-year high of 3.20% about two weeks ago. On the data front, durable goods orders on Wednesday and PCE price index on Friday will also impact the US dollar and the precious metal by extension.   

Gold price technical analysis

Gold price has edged higher in Tuesday’s session;  holding steady above the crucial level of 1,850. As at the time of writing, it was at 1,855.50.

Even so, it remains below the 25 and 50-day exponential moving averages as seen on a daily chart. In the immediate term, I expect the precious metal to continue finding resistance at 1,865.02; which is along the 25-day EMA. Subsequently, it may remain range-bound with 1,842.52 being the range’s lower border.

A rebound of the US dollar may push gold price lower to find support at 1,825.89. On the flip side, pressure on the greenback may boost it to 1.877.74.