Gold Price Forecast XAU/USD – Hits 6-month Peak on Technical Move Ahead of Fed Minutes

Gold futures are testing a six-month high early Tuesday with buyers taking advantage of thin post-holiday volume. The price action suggests the move is being driven by technical traders helped by the absence of fresh technical developments. However, conditions could change as early as Wednesday with the market’s attention turning to minutes from the U.S. Federal Reserve’s latest policy meeting.

At 06:52 GMT, February Comex gold futures are trading $1847.50, up $21.30 or 1.17%.

Volume should start to pick up as the week progresses. In addition the Fed Minutes, traders will also get a chance to respond to the ISM Manufacturing PMI and JOLTS Job openings reports on Wednesday.

Gold traders will also get the opportunity to respond to fresh data on the U.S. labor market on Thursday with the release of the Challenger Job Cuts, ADP Non-Farm Employment Change and the U.S. Weekly Unemployment Claims reports.

Even more information will be revealed on Friday with the release of the U.S. Non-Farm Payrolls report. This government report will provide data on Average Hourly Earnings, Non-Farm Employment Change and the Unemployment Rate. Additionally, even more information on the state of the economy will be revealed in the ISM Services PMI report.

Fed Minutes Could Set the Tone

While most of the reports this week will be centered on PMI and labor market data, the Fed meeting minutes due to be released at 19:00 GMT on Wednesday are likely to set tone of the week.

In December, the Federal Open Market Committee (FOMC) raised overnight rates by 50 basis points. This was deemed a less-aggressive move following four consecutive 75 basis point increases.

Gold traders are hoping the Fed minutes reveal the details of issues, debates and how much consensus there was among FOMC members. Traders will use this information to determine to determine whether the hawkish stance is fading or likely to increase.

The minutes will also include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus. In other words, some portion of the market doesn’t believe the Fed will raise its benchmark rate as high as 5.00% – 5.50%

Given this slight, but important divergence, the minutes could shift the mood of gold traders to more bullish or more bearish.