XAU/USD remains poised to test $2,550, with eyes on Fed Minutes

• Gold price consolidates recent gains to record highs of $2,532 in Wednesday’s Asian trading.
• The US Dollar and US Treasury bond yields lick their wounds on dovish Fed expectations amid a risk-off mood.
• The focus remains on Wednesday’s FOMC Minutes and Fed Chair Jerome Powell’s speech on Friday.
• Gold price set to clinch fresh record highs, as the daily technical setup stays constructive.

Gold price is on the front foot above $2,510 in Wednesday’s Asian trading, consolidating the previous upsurge to a new all-time high of $2,532. Gold traders take account of broad risk-aversion and refrain from placing fresh bets ahead of the  Minutes of the US Federal Reserve (Fed) July meeting due later on Wednesday.

Gold price eyes more gains and the Fed Minutes

Gold price reversed Monday’s brief correction and jumped back on the bids on Tuesday, registering a fresh record high above the $2,500 level. The US Dollar downtrend extended alongside falling US Treasury bond yields, courtesy of dovish expectations from the US Federal Reserve (Fed) and the USD/JPY sell-off, aiding the Gold price rebound.

Markets expected that the Minutes of the Fed’s July meeting on Wednesday and Friday’s Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium will double down on the central bank’s dovish stance, as disinflation remains in progress and the US economy stands resilient. This narrative weighed heavily on the Greenback even though risk sentiment took a hit.  

Wall Street indices snapped their longest rally this year, as markets resorted to profit-taking in the lead-up to Wednesday’s Fed Minutes, closely watching expected annual Nonfarm Payrolls revisions from the Bureau of Labor Statistics (BLS) and Friday’s speech by Fed Chair Powell.

Bloomberg reported that economists “expect the government’s preliminary benchmark revisions on Wednesday to show payrolls growth in the year through March was at least 600,000 weaker than currently estimated — about 50,000 a month.”

“Such figures also have the potential of shaping the tone of Fed Chair Jerome Powell’s speech at week’s end in Jackson Hole, Wyoming,” Bloomberg added.

Risk-off flows extend into Asia this Wednesday, as all the regional indices tumble. A steep sell-off in China’s tech stocks leads the declines in the Asian stock markets. JD.com Inc. plunged as much as 12% after a report on Walmart Inc.’s planned stake sale. China’s property market and growth concerns also continue to haunt markets.

The US Dollar is unable to capitalize on risk-aversion, helping keep the USD-denominated Gold price afloat. An imminent Fed rate cut in September and looming geopolitical risks in the Middle East also pin Gold price near all-time highs.

Markets are currently pricing in a 69.5% likelihood of 25 basis points (bps) interest-rate cut at the Fed’s September policy meeting, with a 30.5% chance of a 50 bps cut, according to the CME Group’s FedWatch tool.

Meanwhile, the latest report from the World Gold Council (WGC) said that “anecdotal reports suggest that there has been strong buying interest from jewelry retailers as well as consumers since the duty reduction.” India’s recent import tax cut on Gold triggered a downtick in prices., fuelling demand for the bright metal.

Gold price technical analysis: Daily chart

The short-term technical outlook for Gold price remains constructive, as a symmetrical triangle breakout remains in play.  

The 14-day Relative Strength Index (RSI) holds firm above the 50 level, currently near 66, suggesting that more gains remain in the offing for Gold price.

Should Gold buyers recapture the record high of $2,532, the next relevant topside target is seen at the $2,550 level. Acceptance above the latter could challenge the $2,600 round level en route to the triangle target, measured at $2,660.

However, if the Gold price faces rejection at higher levels, a correction could ensue targeting the immediate support seen at Monday’s low of $2,486.

A breach of the latter will call for a test of the triangle resistance-turned-support, now at $2,470. Further south, the $2,450 psychological barrier will challenge the bullish commitments.