Gold rebounds above $4,350: can Fed minutes push prices back toward $4,500?

Gold edged higher on Wednesday as US Treasury yields retreated, giving bullion some breathing room after a steep decline as traders waited for the Federal Reserve’s July meeting minutes.

Spot gold traded around $4,350 an ounce in Asian hours after sliding nearly 2% on Tuesday.

The rebound came as the benchmark 10-year Treasury yield eased towards 4.70% and the 30-year yield slipped from levels near a 19-year high.

The move leaves gold caught between two forces. Softer economic data has reduced expectations for another Fed rate increase, but high oil prices and lingering fiscal concerns are keeping inflation and long-term borrowing costs elevated.

Fed minutes could reshape September rate bets

The Fed kept its benchmark rate at 3.5% to 3.75% at its July 28-29 meeting, though three policymakers dissented in favour of an increase.

That split gives Wednesday’s minutes added significance as investors look for clues on how broad support for tighter policy may be.

CME FedWatch pricing still points to a September hold as the more likely outcome, while expectations for an increase have eased following softer US economic readings.

The latest futures pricing showed roughly a two-thirds probability that rates will remain unchanged.

OANDA senior market analyst Kelvin Wong sees the retreat in rate-hike expectations, combined with concerns over government finances, as supportive for gold.

Lower yields generally reduce the opportunity cost of holding bullion, which pays no interest.

Even so, the recent jump in long-dated sovereign yields shows the relationship is becoming less straightforward.

Investors are also demanding greater compensation for inflation and fiscal risk, factors that can strengthen demand for gold as a defensive asset.

Gold’s next technical test sits near $4,390

After Tuesday’s selloff, attention is turning to whether gold can rebuild momentum above the $4,390 area.

FXTM market research head Lukman Otunuga sees a sustained move through that level as potentially clearing the way towards roughly $4,505.

A break below $4,300, however, could bring support around $4,200 and $4,150 back into focus.

Gold remains well below its January record, but has recovered strongly during August as weaker US data and softer rate expectations encouraged investors to return to the metal.

That makes the Fed minutes a potential catalyst in either direction.

A more hawkish account could drive yields higher and put bullion under renewed pressure, while evidence that policymakers are becoming less inclined to tighten could reinforce the rebound.

Iran risk keeps the inflation trade alive

Geopolitics remains another complication for the rate outlook.

President Donald Trump said on Tuesday that the US was not holding talks with Iran and maintained that the Strait of Hormuz was open, while Tehran continued to dispute that account.

Oil prices rose again on Wednesday, with Brent trading above $90 a barrel. Persistently expensive energy could keep inflation concerns alive even as other parts of the US economy soften.

Elsewhere, silver traded near $63 an ounce, while platinum gained and palladium was little changed.

The divergence leaves traders balancing gold’s sensitivity to monetary policy against the stronger industrial-demand component in other precious metals.