Dollar Strength Threatens Gold Rally Ahead of Fed Minutes

Gold prices are being supported by geopolitical tensions and a softer dollar, but the question is whether this will continue in the run-up to the upcoming Fed minutes. The US envoys' meeting with Egyptian, Qatari, and Turkish mediators to push forward a Gaza peace plan has contributed to the uncertainty that benefits gold. However, if crude oil prices continue to rise due to restricted shipping through the Strait of Hormuz, it could feed into inflation data and put upward pressure on yields and the dollar.

The rate trade is still uncertain as evidenced by the 9-3 vote at the last Fed meeting where three members, Beth Hammack, Neel Kashkari, and Lorie Logan, voted for a quarter-point increase. The minutes from this meeting will provide insight into whether these dissenters were speaking alone or if there was a larger group that agreed with them.

Gold traders have already repriced the September futures aggressively, but if the minutes are hawkish, it could lead to a rebound in the dollar and undo some of the gains in gold. The key levels for spot gold include the minor bottom at $4311.04, which is currently being tested, as well as the 200-day moving average at $4505.32.