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Gold Price Forecast – The Yellow Metal Consolidates Ahead of the Fed

By:
David Becker
Published: Jun 11, 2018, 18:14 UTC

Gold Prices continue to move sideways ahead of the Fed and ECB meetings this week.  Price shave been rangebound since mid-May and are likely to remain in

Comex Gold

Gold Prices continue to move sideways ahead of the Fed and ECB meetings this week.  Price shave been rangebound since mid-May and are likely to remain in a tight range until the ECB and Fed plays their hands. Support is seen near an upward sloping trend line that comes in near 1,288. Resistance is seen near the 50-day moving average at 1,314. Momentum is positive to neutral as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices.

The Fed Could Generate a Stronger Dollar

A stronger dollar could cap oil prices. The FOMC is one among several key events ahead that could rattle the markets, alongside ongoing trade uncertainties. With a 25 bp tightening baked in, the focus will be on the Fed’s forward guidance, including the dots, as well as any tweaks to the IOER. The Fed will likely maintain the median dot projection of three rate hikes this year, though there’s speculation of a bump up to four. The 2019 outlook to be left unchanged at three tightening as well, underscoring the gradualist mantra.

FOMC Forecast revisions to be released Wednesday

FOMC Forecast revisions to be released Wednesday after the FOMC meeting should reveal increases in the 2018-19 GDP estimates, alongside small upward tweaks in the low-end 2018 PCE chain price estimates, with possible small bumps for 2019, and modest trimmings in the high-end jobless rate estimates across the forecast horizon. For GDP, the Fed’s March estimates incorporated the CBO scoring of the final tax law, though strong economic reports since then and upward revisions in market estimates should feed greater optimism at the Fed as well. GDP growth should be boosted of 0.1%-0.2% through 2018-19, but unchanged estimates for 2020. We also expect 0.1% boosts in the Fed’s low-end 2018 headline and core PCE chain price estimates, with possible lifts in low-end 2019 figures, though many expect 2020 projections to remain the same. The high-end jobless rate estimates could be reduced by 0.1% across the board, given a stronger growth path for payrolls.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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