Gold prices are trading lower on Wednesday morning, as a stronger US dollar and elevated Treasury yields weigh on the precious metal. Higher bond yields are providing support to the dollar while also increasing the opportunity cost of holding non-yielding assets such as gold, creating a double headwind for bullion. Investors are also adopting a cautious stance ahead of the release of the latest FOMC minutes later today. Recent softer employment and inflation data have significantly reduced expectations of another rate increase in October, although markets continue to price in a strong possibility of further tightening before the end of the year. Against this backdrop, traders will scrutinise the minutes for indications of how much support remains within the Federal Reserve for additional rate hikes. Despite the current pressure, gold continues to find underlying support from geopolitical uncertainty, concerns over government debt and inflation, and central bank demand. These factors remain supportive of the longer-term outlook for the precious metal, even as a strong dollar and elevated bond yields limit its upside in the short term.
Ricardo Evangelista, ActivTrades
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