Gold price eases ahead of FOMC minutes, US data

• Gold price pares intraday gains as bets in favour of early rate cuts by the Fed drop slightly.
• Action in the FX domain could turn volatile as FOMC Minutes and Manufacturing PMI are due for release.
• The US Dollar Index recovers as upbeat sentiment-based rally pauses.

Gold price (XAU/USD) surrenders gains generated in the early Asian session amid caution ahead of the Federal Open Market Committee (FOMC) minutes and crucial data from the United States, namely  the Institute for Supply Management (ISM) Manufacturing PMI for December and JOLTS Job Openings data for November. 

The precious metal faces selling pressure as investors reconsider their bets in favour of a rate cut by the Federal Reserve (Fed) in March. An absence of significant discussions about rate cuts by Fed policymakers in the FOMC minutes will dampen the near-term appeal for Gold and support the US Dollar (USD) and Treasury yields.

On the economic data front, the ISM PMI is expected to signal that the US  manufacturing sector remained in a contraction trajectory for the 14th month in a row. Meanwhile, higher job postings by US employers will indicate a steady labor demand.

Daily Digest Market Movers: Gold price surrenders gains ahead of FOMC minutes

• Gold price surrenders the majority of gains generated on early Wednesday as prospects of early rate cuts by the Federal Reserve have trimmed slightly ahead of the publication of the FOMC minutes.
• As per the CME Fedwatch tool, chances of an interest rate cut by 25 basis points (bps) in March have dropped to 67% from 72%.
• The FOMC minutes will provide a detailed explanation about the decision to maintain rates on hold in December’s monetary policy for the third time in a row.
• Apart from that, the outlook on interest rates and the underlying inflation for 2024 and 2025 will be keenly watched.
• Less discussions about rate cuts among policymakers may dampen the near-term appeal for Gold and demand for safe-haven assets will heat up.
• Fed Chair Jerome Powell, in its monetary policy statement, said rate cuts will be a topic of discussion going forward. Cues favouring a delay in rate cuts may stem a dismal market mood.
• In addition to the FOMC minutes, investors will keep an eye on the ISM Manufacturing PMI for December, which will be published at 15:00 GMT.
• The Manufacturing PMI is seen at 47.1, below the 50.0 threshold for the 14th straight month, but higher than the former reading of 46.7. A figure below 50.0  signals contraction in the manufacturing sector.
• Investors will also focus on the fresh orders for the manufacturing sector, which will provide the outlook for 2024.
• Apart from that, the US Bureau of Labor Statistics will publish the JOLTS Job openings data for November. Estimates indicate that job postings were higher at 8.85M against the former reading of 8.733M.
• Meanwhile, a sharp recovery in the US Treasury yields has capped the upside in Gold prices. The 10-year US Treasury yields have recovered to nearly 4.0% as investors are realizing that robust strength in the United States economy in 2024 could delay rate cuts.
• The US Dollar Index (DXY) clings to gains near 102.20 as investors are uncertain in a data-packed week.
• After the ISM factory data, investors will look for the crucial labour market data for December. On Thursday, the Automatic Data Processing (ADP) Employment data will provide fresh cues about labour demand.
• As per estimates, private US employers added 115K job-seekers in December against 103K payrolls created in November.

Technical Analysis: Gold price falls to near $2,060

Gold price falls back slightly below the crucial support of $2,060 after failing to sustain above the $2,080 resistance. The precious metal trades at make or a break ahead of crucial US events. A breakdown below Tuesday’s low of $2,056 could unveil fresh downside for the Gold price towards $2,045. Upward-sloping 20-day and 50-day Exponential Moving Averages (EMAs) indicate that the overall trend is still bullish.