Gold Price Fundamental Daily Forecast – Improving Risk Sentiment Increasing Bullion’s Investment Appeal

Gold futures are edging higher on Tuesday, mirroring the dip in U.S. Treasury yields and the U.S. Dollar. The price action suggests investors are squaring positions ahead of the Federal Reserve’s monetary policy and interest rate announcements on Wednesday.

Volume is below average and the trade a little tentative with many of the major players are sitting on the sidelines as they await the start of the Fed’s two-day meeting later today.

At 05:10 GMT, December Comex gold futures are trading $1641.80, up $1.10 or +0.07%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $151.93, down $1.23 or -0.80%.

Treasury Yields Ease Lower

Treasury yields are drifting lower early Tuesday as traders lighten positions ahead of the start of the Fed’s two-day meeting that ends with policy and interest rate announcements on Wednesday.

Traders are widely expecting the Fed to hike interest rates by 75 basis points. This would be the sixth rate hike of the year and the fourth supersized hike in a row as the central bank fights to curtail high inflation.

In addition to the rate hike, investors are hoping to gain some clarity regarding the Federal Reserve’s future policy pathway from the meeting, as questions remain over how high rates will be hiked in late 2022 and throughout 2023, according to CNBC.

Additionally, there are lingering concerns that the Fed’s aggressive rate hikes are dragging the U.S. economy into a recession, and economic data has been sending mixed signals about inflation.

Dollar Drifts Lower as Risk Sentiment Returns

The U.S. Dollar eased back on Tuesday from a one-week top against a basket of major currencies, as traders reacted to a dip in Treasury yields, while pondering the tone of the message Federal Reserve officials will deliver at Wednesday’s monetary policy meeting.

The safe-haven greenback is being pressured overnight after stocks rebounded in Asia, led by a strong performance in China. This also lifted the major U.S. stock indexes. The rise in risk sentiment also dampened demand for Treasury yields.

Daily Forecast

Ahead of the Fed’s decisions, gold traders are assessing the chances of a slowdown in the pace of future interest rate hikes and the odds of the Fed continuing its hawkish tightening path.

Depending on which way policymakers lean, we could see a trade to $1700 or a breakdown under $1600.

Risk sentiment is likely to control the price action in today’s thinly traded market.