• The market is eyeing the FOMC meeting minutes scheduled for release later on Wednesday.
  • An environment of higher interest rates will likely weigh on the gold price.
  • Concerns over a recession and high inflation have continued to support the precious metal.

Strong dollar

The gold price has edged lower while holding steady within a one-week range. Even with the decline, it remains above the critical level of $1,900. Conventionally, a stronger US dollar and higher Treasury yields weigh on precious metals. A surge in the value of the US dollar makes gold more expensive for buyers holding other currencies. Besides, rising US bond yields increase the opportunity cost of holding the non-yielding bullion. 

As at the time of writing, the dollar index, which tracks the value of the greenback against a basket of six major currencies, was at 99.50. Earlier on Wednesday, it hit an intraday high of 99.73, which is its highest level since May 2020. Over a span of one week, it has risen by close to 2% as it remains above the support zone of $98.00. 

At the same time, the benchmark 10-year Treasury yields hit an intraday high of 2.63%, its highest level since March 2019. It has since pulled back to 2.62%. Since mid-March, it has held steady above the psychological level of 2.00%. 

Nonetheless, the inversion of the Treasury yield curve has increased gold’s safe-haven appeal. The set-up refers to when the yields of a 2-year Treasury note exceed those of the 10-year Treasury note. The situation usually points to a probable recession, an aspect that has offered support to the gold price. 

Granted, skeptics of this notion argue that real yields remain negative. Besides, some analysts and traders pay more attention to the 3-month and 10-year yield curves, which remains positive. 

FOMC meeting minutes

Amid the heightened inflationary pressures and concerns over a recession, investors are keen on the FOMC meeting minutes scheduled for release later on Wednesday. In its March meeting, the Fed increased interest rates for the first time in over three years by 25 basis points. 

Since then, the US central bank has shifted to a more aggressive stance. In an attempt to ease inflation, the market expects it to hike rates by 50 basis points from its May meeting. In the scheduled Fed meeting, investors will be looking for further cues on the bank’s plan to hike rates and reduce its massive $8.9 trillion balance sheet.

On the one hand, an environment of higher interest rates will weigh on the gold price. However, investors are concerned that the Fed’s aggressive move in dealing with inflation may push the economy into a recession. Besides, the ongoing Russia-Ukraine crisis will continue to boost the precious metal.  

Gold price technical outlook

The range between 1,944.72 and 1,914.90 has been a crucial one for the precious metal for about a week now. Indeed, it has been trading within this horizontal channel since early last week; momentarily rising above it towards the week’s end. 

On a daily chart, the gold price is slightly below the 25-day EMA while remaining above the 50-day EMA. As investors await the FOMC meeting minutes, I expect it to remain in the aforementioned range. 

An aggressive tone by the Fed will likely have the bulls defend the crucial support zone of 1,900. Below that level, 1,889.88 and 1,876.41 will be support levels worth looking out for. 

Even so, I expect the gold price to bounce back above 1,900 as the week progresses. This forecast is founded on the bullish drivers of heightened inflation, concerns over a probable recession, and the ongoing Russia-Ukraine war. On the upside, 1,950.50 will remain a crucial resistance zone.

The gold price chart