Gold remains above $4,300 amid Fed pivot signals - Reexamining the FOMC minutes

Continued Buying Near $4,315 After Asian Market Opens

In the early hours of Monday’s Asian market opening, gold(XAU/USD) hovered around $4,315, maintaining a stable trend above the $4,300 level. Market participants are reassessing the possibility of additional rate cuts by the U.S. Federal Reserve(Fed) next year, highlighting gold’s appeal as a safe-haven asset. Notably, the upcoming release of the October Non-Farm Payrolls(NFP) report scheduled for Tuesday has emerged as a ‘key variable’ that could determine short-term market direction.

Accelerating Capital Flows Driven by Risk Aversion

As global economic uncertainty increases, capital tends to flow into gold. Following an incident at Bondi Beach in Sydney, market risk sentiment worsened, reinforcing investor preference for traditional safe assets like gold. This indicates that geopolitical risks and economic uncertainties are structural factors supporting the rise in gold prices.

Signals from Divergent Fed Internal Opinions

There is a clear divergence within the Federal Reserve’s board regarding the direction of interest rate policy. Some officials have suggested that recent rate cuts may have been premature, emphasizing the need for a “more cautious approach” amid incomplete data collection due to the government shutdown. Others maintain that current rates should be maintained to contain inflation, showing a cautious stance toward further rate cuts.

This policy divergence is expected to be more explicitly reflected in the FOMC minutes. Once the recorded discussions are released, market interpretations of the actual consensus within the Fed and the future interest rate trajectory could experience significant volatility.

Potential Risks to Gold Prices from a Strong Dollar Scenario

If hawkish comments from Fed officials dominate the market, the U.S. dollar could regain upward momentum. Since gold, as a dollar-denominated asset, tends to weaken when the dollar strengthens, this could exert immediate downward pressure on gold prices in the short term. Therefore, statements from high-ranking Fed officials, especially the New York Fed President and other Fed policymakers’ public comments, should be closely monitored as key indicators for the gold market.

Conclusion: Tense Balance Between Monetary Policy and Risk Signals

The current level of gold above $4,300 reflects a balance between expectations of further Fed rate cuts and global uncertainties. The release of the FOMC minutes, NFP data, and statements from senior Fed officials this week are likely to tip this balance in one direction or the other.