Gold adds to gains above $1290 as greenback weakens after FOMC minutes
- FOMC seems more concerned about low inflation than markets anticipated.
- DXY plummets to multi-week lows, finds support ahead of 93.
- US stocks react positively to dovish FOMC, limit gold's gains.
The XAU/USD pair extended its upside to the $1295 handle in the late NA session but seems to be having a difficult time preserving its bullish momentum. At the moment, the pair is trading at $1293.80, up $13, or 1%, on the day.
FOMC is not convinced that inflation is rising
The minutes of the FOMC's November meeting had virtually no impact on the December rate hike expectations. However, the greenback failed to take advantage of that as markets have been pricing that possibility for the past few weeks. Moreover, the statement showed that some participants argued that the Fed itself may be undercutting inflation expectations by tightening the monetary policy while many participants shared their concerns over the possibility that the soft could inflation could persist.
Weighed by the surprising dovish tone of the statement, the US Dollar Index dipped to 93.13 and went into consolidation. As of writing, the index was at 93.17, losing 0.77% on the day.
In the meantime, amid hopes of fewer than expected rate hikes in 2018, major equity indexes in the U.S. erased their losses, underpinning the demand for the traditional safe-haven precious metal and capping the pair's upside.
With today's sharp rise, the CCI indicator on the daily graph rose above the 100 mark, suggesting that the short-term price action is turning bullish. The pair could encounter the initial hurdle at $1300 (psychological level) followed by $1306 (Oct. 16 high) and $1313 (Sep. 26 high). On the flip side, supports align at $1280 (50-DMA), $1275 (Nov. 20 low) and $1271 (200-DMA).