Gold price remained on edge on Tuesday as investors waited for the upcoming FOMC minutes and statements from Fed officials. The XAU/USD price was trading at 1,745, which was slightly above Monday’s low of 1,733. Gold has rallied by more than 8% from its lowest level in November as the US dollar index has cooled.
Gold and US dollar index diverge
Gold price has always had an inverse relationship with the US dollar index (DXY). This relationship happens because of gold’s role in the financial sector. Unlike other industrial metals like copper and nickel, gold does not have major use in manufacturing. Instead, it is usually bought by investors and central banks to hedge against risk.
Therefore, gold and silver tend to be highly sensitive to monetary policy. In most cases, gold usually thrives in periods of low-interest rates in the United States. For example, it surged to its all-time high in 2021 as the Federal Reserve maintained low-interest rates and implemented an expansive quantitative easing (QE) program.
The next key catalyst for gold prices will be the upcoming statements by Fed officials like Esther George, Loretta Mester, and James Bullard. These officials will provide their forecast about what to expect in the coming meetings. Besides, recent data showed that inflation has started to ease while the price of crude oil has been in a strong downward trend.
The XAU/USD price will also react to the upcoming FOMC minutes. These minutes will provide more color about the next actions by the Federal Reserve. Analysts expect that the Fed will hike rates by 0.50% in December after hiking by 0.75% in the past four meetings.
Gold price prediction
The 4H chart shows that gold price retreated to a low of $1,732 on Monday. This was a notable level since it was slightly above the important support level of $1,730, which was the highest point on October 4. It has also formed a small doji pattern, which is usually a bullish sign. The Relative Strength Index (RSI) has tilted upwards.
Therefore, the XAU/USD price will likely resume the bullish trend as buyers target the next key resistance level at $1,755. A drop below the support at $1,737 will invalidate the bullish view.