Gold stabilized to some extent after yesterday’s decline. Softer Treasury yields and dollar provide some relief. However, the metal continued to trade within a range during the last few sessions. Caution could dominate sentiment ahead of the Federal Reserve’s minutes release.
Additional declines in Treasury yields and a lower dollar could help reduce the opportunity cost of non-yielding assets and could support gold’s recovery. Markets continue to react to changing monetary policy expectations.
The latter prices in a hold on interest rates at the Fed’s next meeting with a 64% probability and a 36% chance of a rate hike. Weaker hike bets could strengthen gold as well as a hold at the Fed’s next meeting. However, rising European yields and the ECB’s expected September 25 bp rate hike to continue to exert downward pressure on the metal.
Looking ahead, the minutes of the Federal Open Market Committee’s July meeting could provide additional information about the Fed’s last interest rate decision. The release could influence monetary policy expectations and move gold prices. Markets will also keep a close eye on Chair Kevin Warsh’s Jackson Hole speech later this month, upcoming economic data, and any material developments in the Middle East and their impact on inflation expectations.
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