• Gold prices had a drop in Asia due to the hawkish bias from Fed.
• Favorable ADP Employment report favors US dollar and raises expectation for the non-farm payrolls numbers.
• Covid woes due to the new variant founded by France also weighs on the market sentiment and underpins bearish trend for XAU/USD.
  

The yellow metal prices fell in Asian session Thursday. Gold saw a fall after the Federal Open Market Committee (FOMC) Meeting Minutes conveyed the hawkish bias of the policymakers which suggested a faster rate-hike and plans to discuss balance-sheet normalization.

The minutes stated that ”participants remarked FOMC should continue to be prepared to adjust the pace of purchases if warranted by changes in the economic outlook.”

Additionally, the minutes said ”most participants judged conditions for a rate hike could be met relatively soon if the recent pace of labour market improvements continued”, also added, ”given outlooks for the economy, labour market, inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated.”

After the FOMC meeting, the US bond yields rallied and the Fed interest rate futures point at the 80% chance of a hike in March 2022.

Stephen Innes, managing partner at SPI Asset Management said “What the market has to be concerned with the end goal is how much the Fed is going to surprise going forward,” “If it surprises with one more rate hike, that would be really negative for gold.”

Elsewhere, Upbeat ADP report also favored the US Dollar. The ADP National Employment report showed U.S. payrolls had a surge last month with reading of 807k more than 505k prior and exceeding by 646k from the 161k forecast and thus potentially raising expectations for the non-farm payrolls numbers which is due today.

Amid market reacting to Fed hawks, fears of the South African covid variant Omicron, also weighed on the market’s risk appetite and impact the gold prices. Although the Market tries to not to react to the rising cases of covid as scientific studies termed Omicron as a mild covid strain, the recent findings of another virus variant and strain on multiple medical systems highlights the COVID-19 woes. It has to be noted that the Omicron is spreading faster and the new variant founded by France is said to spread rapidly than Omicron.

XAU/USD 4 Hour Chart:

Support: 1802.3 (S1), 1794.5 (S2), 1780.8 (S3).

Resistance: 1823.8 (R1), 1837.5 (R2), 1845.3 (R3).

The hawkish bias from Fed and the Covid woes underpins the downtrend for the Precious metal. We expect a bearish trend for XAU/USD.