Gold prices are higher today after the FOMC minutes.
Safe-haven demand was featured in the yellow metal today as the U.S. stock market sold off and fall of US treasury yields. A selloff in the global equity markets provided a strong lift to traditional safe-haven assets and assisted the precious metal. The renewed weakness in the US Treasury yields offers fresh boost to gold price.
The FOMC April meeting’s minutes revealed that a debate on tapering of the bond-buying programme could be on the table “at some point.”
As per the FOMC meeting, Inflation pressures are increasing, with recent data showing the extent to which a supply/demand imbalance has made the prices to surge as materials producers struggle to keep pace with a reopening economy.
That has aroused fears that the Federal Reserve could hike interest rates sooner than expected despite the central bank’s assurances that current price spikes are temporary. This inflationary worries has added support to the yellow metal.
On the other hand, Cryptocurrencies took the spotlight, plunging in the wake of regulatory moves from China.
“If there’s anything grabbing headlines at this hour it’s a crash in cryptocurrencies,” said Erik Bregar, head of FX strategy at Exchange Bank of Canada in Toronto. “That seems to be what everyone is focused on.”
The two main digital currencies, bitcoin and ether, fell as much as 30% and 45% respectively, but significantly pared losses after two of their biggest backers – Tesla Inc (TSLA.O) chief Elon Musk and Ark Invest’s (ARKK.P) Chief Executive Cathie Wood – indicated their support for bitcoin.
While many analysts thought the explosion in crypto interest this year was not sustainable, the trigger for the shake-out was China’s move on Tuesday to ban financial and payment institutions from providing cryptocurrency services. It also warned investors against speculative crypto trading.
XAU/USD 4 Hour Chart:
Support: 1850.8 (S1), 1832.5 (S2), 1812.9 (S3).
Resistance: 1888.8 (R1), 1908.4 (R2), 1926.7 (R3).
The FOMC meeting minutes and the crash of crypto currency supported the yellow metal and we expect a bullish trend for XAU/USD.
