Gold Price Fundamental Daily Forecast – Slightly Lower Amid Uncertainty Ahead of US CPI Report

Gold futures whipsawed on Wednesday before dipping lower for the session as the U.S. Dollar nudged higher, while Treasury yields edged lower.

Although was a lot of noise throughout the session due to a possible gridlock in the U.S. Congressional midterm elections and a collapse of a Crypto Currency exchange, most of the price action was likely fueled by general uncertainty ahead of the release of key U.S. inflation data on Thursday.

On Wednesday, December Comex gold futures settled at $1713.70, down $2.30 or -0.13%. The SPDR Gold Shares ETF (GLD) finished at $158.68, down $0.77 or -0.48%.

Treasury Yields Fall after Midterms, Crypto Selloff

Treasury yields fell on Wednesday as it remained unclear which party would be in control of Congress, and a crypto selloff weighed on investor sentiment.

The yield on the benchmark 10-year Treasury was down four basis points to 4.088%. The 2-year Treasury yield dropped nearly nine basis points at 4.584%.

The price action in Treasurys and the dollar suggest a little safe-haven buying was taking place.

Investors Dialed in on U.S. Mid-Term Election Results

Investors were glued to the U.S. congressional midterm election news all day on Wednesday, hoping to find clues into future spending and monetary policy.

There were likely disappointed, however, since as of late Wednesday afternoon, control of the U.S. House and Senate was still up in the air, as states across the country tallied votes in neck-and-neck midterm election races.

A set of close contests will determine whether Democrats keep their slim majorities in the House and Senate, or if Republicans will seize control of one or both chambers of the legislature.

According to reports, the balance of power may take days or even weeks to determine, especially in the Senate.

Crypto Exchange FTX on the Brink of Collapse

Crypto-giant Binance backed out of its plans to acquire FTX on Wednesday triggering a huge drop cryptocurrencies. FTX, which was valued at $32 billion earlier this year, is now in jeopardy of collapsing.

The selloff put pressure on demand for riskier assets and may have fueled some buying in the safe-haven U.S. Dollar, which weighed on dollar-denominated gold prices.

Looking Ahead to Thursday’s October Consumer Price Index Report

The latest numbers from the Consumer Price Index (CPI) report come out on Thursday, and inflation is expected to remain high.

Forecasts expect it to barely dip below the 8% year-over-year rate it’s been floating above since March.

Specifically, consumer inflation is expected to come in at 7.9% annually as of October, according to a median forecast of 52 economists surveyed by Bloomberg News. That’s only slightly less than September’s 8.2%, and well above the Federal Reserve’s target rate of 2%.

Short-Term Outlook

With the financial markets pricing in a greater than 50% chance of a 50 basis point rate hike in December and gold touching a one-month high on Wednesday, I think it’s safe to say that traders are looking for a much lower consumer inflation number.

If they are wrong and the CPI number meets expectations or comes out high then we could see a sharp break in gold prices.

Another way to look at it. If Thursday’s report is worse than expected, the prospect of another “jumbo” 0.75 percentage point interest rate increase in December is more likely.