Gold prices fell for the sixth consecutive day on Wednesday, as traders weighed the implications of the Federal Reserve’s September Meeting Minutes and positioned themselves ahead of key U.S. inflation data. The price of gold (XAU/USD) traded near $2,610, down 0.37%, as the Fed’s latest guidance on interest rates kept pressure on the precious metal.
The Federal Open Market Committee (FOMC) Minutes revealed that a “substantial majority” of Fed officials favored a 50-basis-point (bps) rate cut during the last policy meeting. However, the report also highlighted internal divisions, with some officials leaning toward a smaller 25-bps cut. While all participants agreed on the need to reduce rates, concerns over inflation and labor market risks remain central to their decision-making.
Following the release of the Minutes, traders revised their expectations for the Fed’s next move. The CME FedWatch Tool showed the odds for a 25-bps cut falling from 85.2% to 75.9%, reflecting growing uncertainty over whether the Fed will continue its rate cuts. Some market participants have now positioned for a potential rate hold, with odds of no change rising to 24.1% from 14.8% earlier in the week.
Adding to the pressure on gold prices, U.S. Treasury yields climbed higher, with the 10-year note yielding 4.062%, a five-and-a-half bps increase. The higher yields supported the U.S. dollar, pushing the U.S. Dollar Index (DXY) up 0.42% to 102.90, its highest level since mid-August 2024. This strength in the dollar and rising yields have weighed on gold, which tends to perform poorly in a higher interest rate environment.
All eyes are now on Thursday’s U.S. Consumer Price Index (CPI) report, which is expected to offer more clarity on the inflation outlook. Market estimates suggest inflation will continue to trend lower, but any upside surprise could cause the Fed to reconsider its rate-cutting path. A stronger-than-expected CPI print could raise the possibility of the Fed pausing its easing cycle, adding further volatility to the gold market.
Gold’s technical outlook remains bearish in the short term, with prices falling below $2,620 and approaching the key $2,600 level. A breach of this support could open the door for a further drop toward the psychological $2,550 mark, with the 50-day Simple Moving Average (SMA) at $2,537 providing additional downside targets. On the upside, if gold manages to rebound and reclaim $2,650, it could pave the way for a challenge of the year-to-date high of $2,685.
For now, traders are keeping a close watch on economic data and Fed commentary, with U.S. jobs data and additional Fed speeches expected to add more context to the central bank’s future moves. The direction of gold prices will likely be shaped by the Fed’s balancing act between controlling inflation and managing labor market risks.
