Gold prices dropped below $2,000 an ounce today, allowing the dollar to stabilize near the multi-year lows. Investors will be closely looking for hints from FOMC minutes due later on Wednesday.Fundamental analysis: Consolidation before FOMC minutes
Spot gold prices fell nearly 1% today as investors anticipate the release of the latest FOMC meeting minutes. U.S. gold futures plunged 0.8% to trade around the $2,000/oz mark.
“Gold is down as the U.S. dollar strengthened slightly this morning. In the short term, a rebound in the USD might inhibit the rally in gold. Gold has registered a 3% gain over the past two days, rendering the metal prices vulnerable to profit-taking activities,” said analyst Margaret Yang.
The dollar index moved up 0.1% against its counterparts after dropping to a more than two-year low in the last session. A higher USD makes gold less appealing for investors who hold other currencies.
However, the USD has also lost its safe-haven appeal following the Fed’s decision to launch a set of fiscal measures and slash interest rates to almost zero to minimize the economic damage caused by the epidemic.
“Given the ferocity of the U.S. dollar sell-off, gold should find plenty of eager buyers on any dips to $1,990 during the session,” said Jeffrey Halley, OANDA’s senior market analyst for the Asia Pacific.
“Although the Fed is not expected to indicate any new monetary stimulus initiatives in the minutes, investors would be paying attention to any change to Fed’s approach to inflation that could be negative for the dollar,” Phillip Futures analysts wrote in a note.Technical analysis: A retest failure
Gold prices fell 0.7% to $1,987.36 per ounce in the early morning, just a week after reaching a 1-week high of $2,014.97/oz. Exactly this level stopped the Gold buyers from revisiting the record highs as it now acts as resistance.Gold price chart (TradingView)
There is a possibility that gold prices also fell on profit-taking as certain investors would prefer to welcome the release of the FOMC meeting minutes on the sideline. Sellers are now testing the intraday support near $1,980/oz.Summary
Gold spot prices slumped below $2,000 as the dollar consolidated near the multi-year lows. Investors are now anticipating FOMC minutes expected later today.
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