Gold Holds Steady on Soft Dollar, Focus on U.S. CPI and FOMC Minutes

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Gold prices firmed on Wednesday as the U.S. dollar eased. The greenback slipped 0.2% from a more than the one-year peak hit yesterday. It made the bullion cheaper for investors using rival currencies. Meanwhile, market participants are waiting for the release of U.S. consumer price inflation (CPI) data and the minutes of the Federal Reserve’s September meeting due later today. They will be looking for clues as to when the central bank will claw back on pandemic-era stimulus.

Spot gold is currently at $1,762.20 per ounce as of 0745 GMT.

Three Fed policymakers believe that the economy has healed enough, and it is time to begin withdrawing crisis-era financial support. Fed Vice-Chair Richard Clarida said the central bank has more than met its price stability mandate and should start tapering in November.

Atlanta Federal Reserve Bank President Raphael Bostic and St. Louis Federal Reserve Bank President James Bullard agreed with Clarida. Bostic said the financial markets gave plenty of liquidity, which would minimize any negative impact of the tapering on the economy. Bullard wants to wrap up the taper in the first quarter of 2022. It would allow the central bank to raise interest if inflation remains or goes even higher.

The Labor Department reported yesterday that the number of Americans quitting their jobs jumped to a record high in August. There are currently more than 10 million job vacancies. The tight labor market would force employers to raise wages, and it could help keep inflation high.

DailyFX currency strategist Ilya Spivak said the CPI data and FOMC minutes would provide a directional analyst for gold.

On the technical front, DailyFX senior strategist Christopher Vecchio noted the formation of shooting star candlesticks in the past two trading sessions. It indicates selling pressure on the yellow metal. The relationship between gold volatility and gold prices has started to normalize. It is not a good sign for bullion prices because the metal tends to benefit during periods of higher volatility.

He also mentioned that while the weekly Slow Stochastics remains at the median line and the exponential moving average (EMA) envelope’s negative slope stays in place, the weekly MACD continues to fall below its signal line. Vecchio does think the downtrend is over. Gold prices are stuck near the $1760/oz level. And the Fed continues to provide signals that tapering is coming soon.