Gold finds support as US Dollar retreats ahead of Fed Minutes

Gold prices rose on Wednesday as the US Dollar weakened and long-term US Treasury yields softened, increasing support for the precious metal. At the time of writing, XAU/USD was trading around $4,371, up 0.90% for the day. However, buyers were cautious, as a mixed economic backdrop kept the metal within a tight range over the past week.

The next key factor in determining Gold's near-term direction will be the Federal Reserve's (Fed) signals and developments in the Middle East, while the US economic calendar remains sparse. The minutes from the Federal Open Market Committee's (FOMC) July meeting, to be released later at 18:00 GMT, will be closely monitored due to ongoing uncertainty about the Fed's interest-rate outlook.

A recent reduction in the likelihood of a September rate hike, as indicated by the CME FedWatch tool, has limited Gold's downside. Additionally, concerns over increasing US government debt, rising investor demand, and stronger central-bank buying, especially from China, have contributed to Gold's support. However, geopolitical risks from the Middle East war and the potential for further Federal Reserve rate increases keep inflation risks on the upside, supporting the expectation that the Fed may eventually raise interest rates.

Analysts at ING consider tonight's release of the FOMC July meeting minutes as the primary catalyst, with the vote being 9-3 for holding rates steady, which proved to be a dovish stance for the US dollar and the front end of the US curve. Gold trades above the 20-day Bollinger simple moving average at $4,219 but is near the 100-day SMA at $4,381.

The upper Bollinger band at $4,519 is the current volatility cap, while a mildly elevated Relative Strength Index on the daily chart and a positive MACD histogram suggest limited bullish momentum. A break below the recent range support at $4,300 could expose the middle Bollinger Band near $4,219, with the $4,000 psychological level offering the next support and the lower Bollinger Band at $3,920 as additional support.

Gold has historically served as a store of value and medium of exchange, and is now seen as a safe-haven asset during turbulent times. Central banks are significant holders of Gold, often diversifying their reserves to support their currencies. The metal's price is influenced by a range of factors, including interest rates, geopolitical events, and the US Dollar's performance.