Gold Market Commentary

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Fed Concerned Over Inflation Progress

Gold prices are seeing heavy selling across early European trading on Thursday. The market has reacted negatively to the release of last night’s FOMC minutes with gold futures now down around 4% from the highs recorded earlier in the week. The minutes yesterday echoed the sentiments shared by many Fed officials this week. Policymakers were concerned over the lack of progress in inflation with many citing the need to keep rates in restrictive territory for longer in order to drive inflation down to target. Indeed, some members were even seen voicing support for further tightening if inflation didn’t start to trend lower again in a satisfactory way.
 

Shifting Fed View

The minutes come a week after the April CPI reading which saw US inflation cooling for the first time this year. However, at 3.4%, headline CPI remains well above target. The key now will be to see whether the very slight dip in inflation last month carried on this month. If seen, this should create more optimism over rate cut expectations for September, allowing gold prices to rebound. However, if inflation is seen holding at current levels or even ticking back up, this will no doubt see traders pushing easing expectations further out into the year, dragging gold lower near-term.
 

Technical Views

Gold

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The rally in gold has stalled for now on an attempted break above the 2427.54 level. With plenty of bearish divergence in momentum studies, the move now runs the risk of creating a double top, suggesting room for a deeper correction if we break neckline support at 2275.43. Bulls need to defend that level to maintain a bullish bias. 


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