Gold Price Analysis: XAU/USD sticks to modest gains around $1,670 ahead of FOMC minutes

• Gold catches fresh bids near the $1,660 support zone amid subdued USD price action.
• Bets for more aggressive Fed rate hikes should limit the USD losses and cap the metal.
• Traders look to FOMC minutes for a fresh impetus ahead of the US CPI on Thursday.

Gold attracts fresh buying near the $1,660 support area on Wednesday and snaps a five-day losing streak to over a one-week low. The XAU/USD holds on to its modest intraday gains, around the $1,670 region through the first half of the European session, though the uptick lacks bullish conviction.

The US dollar consolidates its recent gains recorded over the past five trading sessions as investors look to the FOMC meeting minutes for a fresh impetus. The subdued USD price action offers some support to the dollar-denominated gold. That said, hawkish Fed expectations continue to act as a tailwind for the greenback and keep a lid on any meaningful upside for the non-yielding yellow metal.

The markets seem convinced that the US central bank will stick to its aggressive policy tightening path to tame inflation and have been pricing in another supersized 75 bps rate hike in November. This remains supportive of elevated US Treasury bond yields and favours the USD bulls. Apart from this, a generally positive risk tone contributes to keeping a lid on the safe-haven XAU/USD.

Market participants also seem reluctant and prefer to move to the sidelines ahead of the FOMC minutes, which will be looked upon for clues about future rate hikes. The focus will then turn to the US consumer inflation on Thursday, which is expected to remain stubbornly high. This will reinforce the Fed's hawkish rhetoric and suggest that the path of least resistance for gold is down.

Hence, any subsequent move up could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Bearish traders, however, might wait for sustained weakness below the $1,660 area before placing fresh bets. In the absence of any major market-moving economic releases from the US, the USD price dynamics and the broader market risk sentiment will be looked upon for some impetus.

Technical levels to watch