FX.co ★ Gold Prices Slide Ahead of Fed Minutes

Gold prices fell 2% to $4,080 an ounce on Wednesday, pressured by a stronger US dollar as investors awaited the Federal Reserve’s September meeting minutes for guidance on the future path of interest rates. While softer labor market data has reinforced expectations that the Fed will keep rates unchanged in October, markets are still pricing in an over 80% probability of a rate hike in December, according to the CME FedWatch tool.

Kansas City Fed President Jeff Schmid indicated that interest rates may still need to move higher to fully contain inflation, whereas San Francisco Fed President Mary Daly emphasized that upcoming policy decisions will hinge on whether current inflationary pressures prove transitory or more entrenched.

Despite the recent pullback, longer-term sentiment toward gold remains positive. Delegates at the London Bullion Market Association’s annual conference in Italy projected that gold could reach $5,013 an ounce over the next 12 months. Supporting this bullish outlook, official data show that China’s central bank increased its gold reserves again in September, marking its 23rd consecutive month of purchases.