Gold edges higher as the US Dollar falls ahead of the Fed Meeting Minutes
Gold (XAU/USD) is extending its decline on Wednesday for a second consecutive day as the US Dollar (USD) and US Treasury yields firm ahead of the release of the Federal Open Market Committee (FOMC) Meeting Minutes.
The US Dollar Index (DXY) is falling after testing its highest level in two weeks, pushing XAU/USD above $3,300 at the time of writing.
The upcoming release of the FOMC Minutes from the June meeting is expected to shed light on the Fed’s internal debate over the path of monetary policy.
In June, the central bank opted to maintain its benchmark interest rate at 4.25% to 4.50%, citing a resilient labor market and lingering inflation pressures.
Last week’s Nonfarm Payrolls (NFP) report reinforced that outlook, showing continued strength in employment and reducing expectations for a near-term rate cut. As a result, yields have firmed across the curve, further strengthening the USD and weighing on Gold.
Gold typically shares an inverse relationship with the US Dollar and interest rates. When yields rise, interest-bearing assets become more attractive relative to Gold, which does not offer a yield. This dynamic has continued to pressure bullion in recent sessions.
Trade prospects and tariff extension dampen Gold’s short-term appeal
Letters outlining the reciprocal tariff rates that the Trump administration aims to impose on imports to the US continue to be sent to trading partners of the World’s largest economy.
This has reignited concerns over the potential economic implications of the levy increase.
The latest news that the European Union (EU) and the United States (US) are making progress in trade talks has provided additional support for the Greenback.
However, with the new rates expected to take effect from August, the three-week extension has increased the hopes that more trade deals between the US and its major counterparts could be announced. This has weakened the short-term appeal of bullion.
Source: FXstreet
