All eyes on the Fed
Gold investors will be looking at the FOMC minutes carefully on Wednesday to get a clue for gold's near term direction. The factors weighing on gold recently have been a dollar which has been bouncing off the 92.00 region and a coronavirus vaccine hope. The hope of the vaccine resulted in US10 year yields spiking higher towards 1.00% around Nov 09 and sparked the biggest daily loss in gold futures 7 years. It also prompted outflows in ETF holdings.
So, gold has two narrative to balance.
The sellers narrative
A vaccine is on the way and with it normality and a return to rising rates, albeit eventually. Gold can be sold.
The buyers narrative
Low interest rates are here for years and record QE purchases will keep the appeal of gold alive over the longer term. Plus physical demand should pick up for the Lunar New year as China starts buying gold again.Gold can be bought
The minutes in focus
The Fed's minutes will be viewed with scrutiny tonight due to the disagreement between Secretary Mnuchin and Fed Chair Jerome Powell over whether to preserve emergency lending programs which makes the prospect of further stimulus uncertain. So, if the US Gov't and the Fed are seen to be not coming to rescue the US economy then expect more bear term gold sellers.
