Gold Price Fundamental Daily Forecast – Traders Awaiting Key PMI Data that Could Influence Fed’s Tone

Gold futures are edging lower after reversing earlier gains. Traders are essentially tracking the price action in U.S. Treasury yields, which weakened from its earlier high and the U.S. Dollar, which rebounded from an earlier set-back.

The volatile price movement is being fueled by a change in sentiment by speculators, who bought gold on Friday on the hope the U.S. Federal Reserve might consider less aggressive hikes then sold bullion after shifting their focus back to underlying concerns about global growth.

At 09:52 GMT, December Comex gold futures are trading $1652.30, down $4.00 or -0.24%. On Friday, the SPDR Gold Shares ETF (GLD) settled at $154.13, up $2.68 or +1.77%.

Gold Underpinned as Investors Assess Fed stance

Prices are falling after closing out last week with an impressive short-covering rally after a report said the U.S. Federal Reserve will likely debate on a smaller rate hike in December, raising hopes the central bank may be poised to adopt a less-aggressive policy stance.

Some Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to a Wall Street Journal report, and how to signal plans to approve a smaller increase in December, Reuters reported.

San Francisco Federal Reserve President Mary Daly echoed that sentiment and said it’s time to start talking about slowing the pace of the hikes in borrowing costs and doing so should avoid sending the economy into an “unforced downturn” by hiking interest rates too sharply, Reuters noted.

In addition, Chicago Federal Reserve Bank President Charles Evans reiterated his stance the Fed should get policy to “a bit above” 4.5% by early next year and then hold it there.

Treasury Yields Steady Ahead of U.S. Purchasing Managers’ Index Reports

Treasury yields held steady on Monday as market participants awaited the release of October’s flash manufacturing and services PMI (purchasing managers’ index) data.

Investors will be paying close attention to the release of flash manufacturing and services PMI data for October. PMI data reflects whether an economy is expanding or contracting, and by how much.

The reports, due to be released at 13:45 GMT, are expected to show activity in the services sector slowed in September, while the manufacturing sector grew during the same time period.

Short-Term Outlook

Today’s price action suggests that last week’s surge may have been an example of too much, too soon. Furthermore, it was also likely fueled by short-covering rather than new buying.

The Fed’s curbing of the pace of its rate hikes would be a bullish event, but strong gold short-sellers are not likely to cover their positions without strong proof. Additionally, making the move at this time ahead of next week’s Fed interest rate announcement would have been too risky.

The Fed is widely expected to raise its benchmark overnight interest rate by 75 basis points at its November 1-2 meeting. Until then, gold traders will have to deal with reports on U.S. economic growth and core inflation data later this week, while the European Central Bank is widely expected to raise its rates by 75 basis points

I don’t think gold is ready to rally yet. First of all, the Fed is still hawkish and secondly, there is no support base.

We’re not likely to see a major move in gold until the economic data supports one, and the Fed offers clues as to whether it’s close to pausing or keep tightening rates.