Gold Price Fundamental Daily Forecast – Edging Higher Despite Fed’s ‘Go Big or Go Home’ Tone

Gold futures are edging higher on Thursday with yesterday’s low remaining intact as traders continue to assess the hawkish tone of Wednesday’s U.S. Federal Reserve policy announcements.

On Wednesday, gold futures managed to eke out a small gain despite a rate hike from the Fed and a hawkish outlook for future rate moves. The move suggests traders weren’t surprised by the news or oversold technical conditions.

But those are short-term evaluations, the long-term outlook is still bearish because rising interest rates are expected to keep the U.S. Dollar buoyed and a stronger greenback tends to drive down foreign demand for dollar-denominated assets.

At 08:17 GMT, December Comex gold futures are trading $1677.30, down $1.60 or -0.10%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $155.79, up $0.72 or +0.46%.

Hawkish Fed Drives Bearish Tone

Gold prices are being capped on Thursday, as the U.S. Dollar rose to another multi-year high after the U.S. Federal Reserve raised its benchmark interest rate by another 75 basis points on Wednesday and flagged more hikes to follow.

Although the rate hike was expected, it was the hawkish comments and new projections from policymakers that set the bearish tone for gold.

Federal Reserve Chair Jerome Powell vowed on Wednesday that he and his fellow policymakers would “keep at” their battle to beat down inflation.

Additionally, in a sobering new set of projections, the Fed foresees its policy rate rising at a faster pace and to a higher level than expected, the economy slowing to a crawl, and unemployment rising to a degree historically associated with recession, Reuters reported.

In his press briefing, Powell stuck with the hawkish tone set during his remarks last month at the Jackson Hole central banking conference in Wyoming.

Powell once again reiterated his prediction of “pain” for U.S. consumers. He further added the indicated path of rates showed the Fed was “strongly resolved” to bring down inflation from the highest levels in four decades and that officials would “keep at it until the job is done” even at the risk of unemployment rising and growth stalling to a stall.

“We have got to get inflation behind us,” Powell told reporters. “I wish there were a painless way to do that. There isn’t.”

Short-Term Outlook

There is nothing in the Fed statement and Powell’s comments to support gold prices at this time. However, we get that relatively low prices and over a month until the next Fed rate hike on November 2, could fuel a short-covering rally. Without an establish bottom, however, any rally would still be treated as a shorting opportunity.

The Fed’s not trying to cause a recession, in my opinion. But being late to identify inflation as being more than transitory and pulling stimulus later rather than sooner, has forced the central bank to tightened policy more quickly and with more fire-power.

Not only is the Fed trying to drive down inflation without wrecking the economy, but it’s also trying to save its reputation as an inflation fighting machine. In order to do that, it has to take the most aggressive approach.