Gold Price Fundamental Daily Forecast – Gains Capped as WSJ Article Flip-Flops on Early ‘Pivot’ by Fed

Gold futures are trading nearly flat on Monday, pressured by a slight rise in U.S. Treasury yields and a firm U.S. Dollar. The market is in a position to post its seventh straight monthly loss as investors brace for another super-sized Federal Reserve rate hike. However, some traders are hoping policymakers announce a slowing in the pace of future rate advances.

At 06:44 GMT, December Comex gold futures are trading $1645.10, up $0.30 or +0.02%. On Friday, the SPDR Gold Shares ETF (GLD) settled at $153.18, down $1.56 or -1.01%.

Gold Hit 2-Week High Last Week Before Sellers Re-Emerged

Gold prices rose to a two-week high last Wednesday as the dollar and U.S. bond yields slipped on expectations the Federal Reserve will temper its aggressive rate-hike stance starting in December.

Meanwhile, the dollar extended losses to a more than one-month low against its rivals, making gold less expensive for other currency holders. Benchmark U.S. 10-year Treasury yields dropped to a one-week low.

Data last Tuesday also showed that U.S. consumer confidence ebbed in October, home prices fell sharply in August, and there were signs that the Fed’s aggressive stance was starting to cool the labor market.

However, sellers regained control on Thursday, following stronger-than-expected U.S. Gross Domestic Product data. Gold prices were hit especially hard on Friday after data showed that U.S. consumer spending rose more than expected in September, while underlying inflation pressures continued to bubble, paring expectations of a Fed slowdown.

In other news that is one of the best indicators of demand, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.28% to 922.59 tonnes on Friday, its lowest level since March 2020.

Looking Ahead …

Bringing down inflation has been the Federal Reserve’s top priority in 2022, spurring central bank policymakers to hike interest rates since March.

That being said, the central bank is expected to raise rates by 75 basis points for the fourth-straight time on November 2 before “pivoting” to a slower pace of rate hikes, which the market has begun pricing in.

Traders are expecting some uncertainty over the timing of the “pivot”, however, based on developments over the weekend.

A Wall Street Journal article two weeks ago, flagging a possible discussion about slowing hikes, seemed to trigger optimism about a shift in tone. But a report from the same author over the weekend pointed to a lengthy period of high rates, according to Reuters.

Gold prices could be capped ahead of the Fed announcement because rates and Fed funds futures have now tempered initial optimism and see the funds rate hitting near 5% by May next year.