Gold Price Fundamental Daily Forecast – Investors Placing Early Bets on Fed Rate Hike Slowdown

Gold futures are edging higher on Wednesday, supported by a dip in U.S. Treasurys and a slight pullback in the U.S. Dollar against a basket of major currencies. However, the main focus for traders today will be the U.S. Federal Reserve’s interest rate decision and its outlook on the future pace of interest rate hikes, due to be released at 18:00 GMT.

At 10:46 GMT, December Comex gold futures are trading $1658.80, up $9.10 or +0.55%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $153.46, up $1.55 or +1.02%.

Treasury Yields Dip Ahead of Fed Announcements

U.S. Treasury yields are lower ahead of the conclusion of the Federal Reserve’s November meeting, where investors expect a 75 basis point interest rate hike and signals about future policy.

Early Wednesday, the yield on the benchmark 10-year Treasury was down by less than a basis point to 4.046%. The policy-sensitive 2-year Treasury yield reversed some of Tuesday’s gains and was last trading at around 4.52%.

Gold is being underpinned because lower yields tend to increase the investment appeal of non-yielding bullion.

US Dollar Under Pressure as Fed Decision Looms

The dollar is sliding lower early Wednesday as investors awaited the Fed’s policy decision amid speculation it might indicate a slowdown in future rate hikes.

Traders are confident the Fed will raise rates three-quarters of a percentage point, but for the December meeting, futures market traders are split on the odds of a 75- or 50-bps increase.

A weaker greenback tends to drive up foreign demand for dollar-denominated gold.

US Economic Data Source of Uncertainty

Adding to the uncertainty over whether the Fed will remain hawkish or signal a slowdown in rate hikes were reports on job openings and factory activity.

Data released on Tuesday showed that job openings had surged more than expected in September. This tightness in the labor market has been one of the key drivers of soaring inflation, making this a key figure for Fed policy makers.

Meanwhile, the ISM manufacturing PMI reflected that factory activity growth slowed again in October and came close to contracting.

Daily Forecast

Gold investors are hoping the Federal Reserve will provide some guidance on future policy plans and whether interest rate hikes will slow or pause entirely.

Should the Fed announce plans to slow or pause rate hikes entirely then look for prices to soar into $1679.90 to $1693.80.

If the Fed comes across as hawkish and fails to address the potential slow down then look for prices to tumble to at least $1621.10 to $1609.30. The latter is a potential trigger point for an even steeper plunge.

Ahead of the Fed, gold traders will gain further insights into the labor market on Wednesday at 12:15 GMT with the release of the ADP’s employment report. It is expected to show the private sector of the economy added 178K new jobs in October.

A bigger than expected reading could crush the hopes of bullish gold traders for a less-hawkish tone from the Fed.