DXY Drops to June Lows; Gold Gains Momentum
Gold prices strengthened solidly during Wednesday's US trading session, with XAU/USD hovering around US$4,380 per troy ounce—a gain of nearly 1% for the day. This rally followed a weakening US dollar and a moderate correction in long-term Treasury yields, helping gold recover some of the losses sustained in the previous session.
However, buyers have yet to show full conviction. Gold’s price action has remained confined to a relatively narrow range over the past week as the market grapples with conflicting fundamental signals. Attention is now focused on the Federal Reserve's policy trajectory and developments regarding the conflict in the Middle East.
The release of the July FOMC minutes at 18:00 GMT serves as a key catalyst. Since that meeting, US labor and inflation data—coming in weaker than expected—have dampened expectations for interest rate hikes. According to the CME FedWatch tool, the probability of a September rate hike has dropped to approximately 32%, providing support for gold.
Beyond the shift toward a more dovish Fed outlook, gold is also supported by concerns over rising US government debt, improving investor demand, and continued gold purchases by central banks—particularly China. These factors help sustain interest in gold as a medium-term hedge.
Nevertheless, inflation risks have not fully subsided. A surge in energy prices driven by the Middle East conflict could still push inflation back up, keeping the possibility of future Fed tightening on the table. Long-term Treasury yields also remain elevated, limiting gold's upside potential by increasing the opportunity cost of holding a non-yielding asset.
Newsmaker Analysis: Gold currently exhibits a short-term bullish bias, driven largely by the DXY falling to around 99.28—its lowest level since June 5—and the diminishing probability of a Fed rate hike. However, the US$4,380–US$4,400 zone remains a critical resistance area. If the FOMC minutes reinforce expectations that the Fed will hold rates steady, a breakout above US$4,400 could pave the way for further gains. Conversely, a more hawkish tone and a renewed rise in Treasury yields could potentially trigger a quick correction in XAU/USD. (arl)
Source: Newsmaker.id
