Gold trades with mild negative bias; holds above $2,900 ahead of FOMC minutes

• Gold price drifts lower as bulls opt to lighten their bets ahead of the FOMC minutes release.
• Concerns about Trump’s tariff plans and trade war fears lend support to the commodity.
• Fed rate cut bets undermine the USD and further act as a tailwind for the XAU/USD pair.

Gold price (XAU/USD) retreats from the vicinity of the all-time peak, though it manages to hold comfortably above the $2,900 mark through the Asian session on Wednesday. A generally positive risk tone prompts some profit-taking around the safe-haven precious metal amid some repositioning trade ahead of the FOMC meeting minutes. Investors will look for fresh cues about the Federal Reserve’s (Fed) rate-cut path, which, in turn, will drive the US Dollar (USD) and provide a fresh impetus to the non-yielding yellow metal.

In the meantime, the growing acceptance that the Fed will cut interest rates further keeps the USD bulls on the defensive and acts as a tailwind for the Gold price. Apart from this, the uncertainty surrounding US President Donald Trump’s tariff plans, which could trigger a global trade war, might further contribute to limiting any meaningful corrective decline for the bullion. Hence, it will be prudent to wait for strong follow-through selling before confirming that the XAU/USD pair has topped out and placing aggressive bearish bets. 

Gold price is undermined by positive risk tone amid some repositioning ahead of FOMC minutes

• The optimism over a delay in the implementation of US President Donald Trump’s reciprocal tariffs and talks aimed at ending the protracted Russia-Ukraine war prompted some profit-taking around the Gold price on Wednesday. 
• Investors remain worried about a potential escalation in global trade tensions on the back of Trump’s protectionist policies. This, along with bets for further policy easing by the Federal Reserve, supports the safe-haven bullion. 
• The disappointing release of US Retail Sales figures on Friday, along with mixed signals on inflation, suggests that the US central bank could possibly cut interest rates at the September or October monetary policy meeting. 
• In fact, the Fed Funds Futures see the possibility of a 40 basis point rate cut by the end of this year. This keeps a lid on the US Dollar (USD) recovery from a two-month low and should further underpin the XAU/USD.
• San Francisco Fed President Mary Daly said on Tuesday that the US central bank should keep short-term borrowing costs where they are until the progress toward achieving the 2% inflation target is more visible.
• Hence, the market focus will remain on the release of the Fed’s January meeting minutes, which will be looked upon for clues about the central bank’s interest rate trajectory and influence on the non-yielding yellow metal.

Gold price bulls need to wait for sustained breakout above short-term trading range hurdle

From a technical perspective, the range-bound price action might still be categorized as a bullish consolidation phase against the backdrop of the recent strong move up to the all-time peak. That said, the daily Relative Strength Index (RSI) remains close to the overbought territory and supports prospects for an extension of the consolidative price move. Nevertheless, the setup remains tilted in favor of bulls and suggests that the path of least resistance for the XAU/USD remains to the upside. 

Meanwhile, weakness below the $2,925 area is likely to find some support near the $2,900 mark ahead of the $2,878-2,876 zone or the lower boundary of the short-term trading range. A convincing break below the latter could drag the Gold price to the $2,860-2,855 area en route to the $2,834 region. Failure to defend the said support levels might prompt some technical selling and drag the XAU/USD towards the $2,815 region en route to the $2,800 mark and the $2,785-2,784 area.

On the flip side, the $2,940-2,942 region, or the record high touched earlier this month, might continue to act as an immediate strong barrier. Some follow-through buying will be seen as a fresh trigger for bullish traders and set the stage for an extension of a well-established uptrend witnessed over the past two months or so.