In the Asian session on Thursday, the gold price is licking its wounds close to a five-day high below $2,370. The hawkish Minutes of the US Federal Reserve’s (Fed) May policy meeting have contributed to the three-day decline in the price of gold.

At $2,384, the price of gold began on Thursday below the lower bound of a rising wedge formation that has been in place for five weeks.

The rising wedge collapse would be confirmed by a daily close below the latter, allowing for a test of the 50-day Simple Moving Average (SMA) around $2,307.

Buyers of gold must first protect the $2,350 21-day SMA support level, though.

If the downside holds, a retest of the May low at $2,277 is unavoidable.

The 14-day Relative Strength Index (RSI), on the other hand, has halted its decline and is still above the midline, at 54.60, indicating that the price of gold may be able to satisfy some demand from shoppers looking for deals.

A recovery towards the $2,400 mark will occur if buyers of gold can prevent the rising wedge from breaking below.

The high of $2,427 from the previous day will be tested higher. The upper edge of the bearish wedge, $2,453, is the next significant upward objective.

Basic Synopsis

“Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate,” according to the Fed Minutes, which were made public on Wednesday.

The fact that “the recent monthly data had shown significant increases in components of both goods and services price inflation” in the Minutes further highlighted that the Fed policymakers were growing increasingly concerned about the inflation’s intransigence.

These remarks from the minutes cast doubt on expectations of interest rate reductions this year by implying that the Fed may stay to its “higher rates for longer” policy. The FedWatch Tool from CME Group indicates a considerable decline in the likelihood that the Fed will lower rates more than once in 2024.

Together with the rising yields on US Treasury bonds, the hawkish Fed Minutes contributed to the US Dollar’s recovery momentum. This has a significant impact on the price of non-interest-bearing gold.

A number of Fed policymakers have recently given statements that have urged concern regarding the continuation of inflation and have leaned towards postponing rate decreases.

The US stock markets crashed on the hawkish Fed Minutes and caution ahead of Nvidia’s earnings release, which fueled safe-haven flows into US government bonds, but the spike in US Treasury bond yields swiftly disappeared.

However, the US Treasury yield rise did not provide a respite for the gold market, which ended the day much down.

The US dollar’s stop in its upward trajectory is providing support for the gold price as it consolidates its downward gains in Thursday’s trade. Meanwhile, risk sentiment appears to be strengthened by Nvidia’s strong earnings report, which is a chip design and artificial intelligence (AI) behemoth. Compared to the same period in 2023, Nvidia’s revenues and profits increased by 268% and 628%, respectively.

Nonetheless, investors remain cautious due to a sell-off in Chinese stocks. As a result, gold dealers anticipate that the S&P Global US Manufacturing and Services PMI flash readings will confirm the recent hawkish shift in the Fed’s rate stance, which may lead to a further surge in the US dollar.