Gold Price Forecast XAU/USD – Lower on Profit-Taking Ahead of Philly Fed, Housing Starts Reports

Gold futures are under pressure Thursday as U.S. Treasury yields inched higher and the U.S. Dollar recovered slightly from earlier weakness. Some say traders are reacting to U.S. economic data released on Wednesday that dampened hopes of a slowdown in the pace of future interest rate hike.

Volatility is hitting the financial markets shortly before the New York opening. Some of the volatility is being fueled by wild swings in the FedWatch Tool. Early in the session, the rate hike indicator showed an 89.5% chance of a 50 basis point rate hike by the Fed in December. Later, it dropped to 80%. It is currently at 84.4%.

At 11:56 GMT, December Comex gold futures are trading $1768.20, down $7.60 or -0.43%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $165.14, down $0.36 or -0.22%.

Release of UK Autumn Statement Rattling Markets

Gold prices dropped to their low of the session shortly after the release of a forecast calling for Britain’s economy to shrink next year. Finance minister Jeremy Hunt is currently outlining how he and Prime Minister Rishi Sunak will raise taxes and cut spending to repair the public finances, despite the grim outlook.

The new forecast is for gross domestic product to contract by 1.4% next year compared with a projection for growth of 1.8% in the previous outlook published in March by the Office for Budget Responsibility (OBR).

Hunt said the OBR judged that Britain – where high inflation is creating a cost-of-living crisis – is already in recession. It is the only Group of Seven nation yet to recover its pre-pandemic size, having previously suffered a decade a near-stagnant income growth.

Hunt had warned of more pain in his budget statement in the days leading up to Thursday’s announcement.

Gold Traders Monitoring US Economic News

Gold prices are showing signs of topping after U.S. data on Wednesday showed U.S. retail sales increased more than expected in October, renewing expectations that the improved economic data could prompt the Federal Reserve to keep hiking rates.

Gains are also being capped by hawkish Fed member comments. On Wednesday, San Francisco Fed President Mary Daly told CNBC it’s reasonable for the Fed to raise its policy rate to a 4.75%-5.25% range by early next year, and that pausing rate hikes is not part of the discussion.

Short-Term Outlook

Currently, gold traders are looking ahead to the release of key data from the manufacturing and housing sectors, which could provide further insights into the state of the U.S. economy.

Traders are awaiting the release of housing start and preliminary building permit figures for October. The sector has been impacted by rising prices of materials and higher mortgage rates.

Gold investors will therefore be looking to the fresh data for hints about how the U.S. economy is faring in light of persistent inflation and high interest rates.

Investors will also be monitoring a series of Fed speaker remarks for clues about the central bank’s policy plans.

The major concern for gold investors will be stronger-than-expected economic data. Hot data could make investors less optimistic about the Fed slowing the pace of its interest rate hikes. This could put pressure on gold prices.