Gold Gains Support as Dollar Retreats Ahead of Fed Meeting Minutes Release

During the Asian session on Wednesday, spot gold (XAU/USD) rebounded to around $4,371, up approximately 0.90% on the day, after plunging nearly 2% the previous day. A weaker U.S. dollar index and a slight pullback in long-term U.S. Treasury yields from recent highs provided direct external market support for the dollar-denominated precious metal.

**Dollar and Treasury Yield Pullback Serve as Short-Term Catalyst**

The recent global bond market selloff had pushed U.S. Treasury yields sharply higher, putting notable pressure on gold, a non-yielding asset. As yields corrected from highs, gold regained buying interest. The dollar index softened in tandem, further lowering the opportunity cost of holding gold. However, overall trading remained cautious ahead of the release of the Federal Reserve's July meeting minutes, with investors seeking to gauge the true extent of internal divergence within the Fed regarding the future path of rate hikes.

**Meeting Minutes to Reveal Depth of Internal Divergence**

Although the Fed held rates steady for the fifth consecutive meeting in July, three officials voted against the decision and favored a 25-basis-point hike, with the 9-to-3 split vote underscoring intense debate within the policymaking ranks. The key focus of these minutes is how many officials, beyond the known three dissenters, are concerned about a resurgence in inflation and believe further policy tightening is still needed this year. If the minutes show hawkish voices still prevailing, Treasury yields could move higher again, capping gold's rebound potential. Conversely, if more officials begin to focus on risks of slowing employment and economic growth, market expectations for a September rate hike will cool further, and a pullback in the dollar and yields would create conditions for gold to challenge higher resistance levels.

**Weak Data Has Already Significantly Undermined Rate Hike Expectations**

A series of recent soft economic data has notably shifted market pricing. According to the CME FedWatch tool, the probability of a Fed rate hike in September has plunged to approximately 33% from around 55% a week ago. Signals of cooling inflation and a slowing labor market are driving the trading logic to shift from "whether to continue hiking" to "the extent of economic slowdown and the Fed's degree of caution." Against this backdrop, gold's short-term trajectory will remain highly dependent on the upcoming meeting minutes and subsequent economic data in further reshaping policy expectations.