Gold (XAUUSD) Price Forecast: Traders Eye 50-Day MA for Gold Rally Price Prediction

Gold Futures: Consolidation Continues as Traders Await Fed Minutes

Spot gold is lower on Tuesday as prices continue to consolidate. The stronger US dollar and position-squaring ahead of Wednesday’s Fed minutes are likely weighing on demand. However, gains are likely being limited by another drop in 10-year US Treasury yields. Traders are also eyeing a dip in the 2-year yields, which have bounced off their intraday low. Gold could see further losses later today if yields in these two instruments turn positive.

Dollar Strength Remains Rangebound

Despite the early strength in the US dollar, it remains rangebound as traders await more delayed US data this week, including advance figures on gross domestic product and the PCE inflation index. The minutes from the Fed’s January meeting will also be watched carefully.

Last Week’s Data Is Still Being Digested

All of this new information is on top of last week’s US consumer price data, which increased less than expected in January, and a jobs report that came in higher than expected. Taking both reports into consideration alongside the weakness in gold, it looks as if traders believe the reports gave the Fed additional leeway for policy easing this year.

What Gold Traders Want to Hear From the Minutes

As far as the minutes are concerned, gold traders will be looking for evidence that two rate cuts this year are still possible. They will also be interested in knowing whether the deciding factor for a rate cut will be the labor market or inflation.

The Fed’s Dilemma

The way I see it, strong labor and firm inflation will keep the Fed on hold, which will lead to more sideways to lower trading in gold. The question I hope will be answered in the minutes is about situations where labor is weak and inflation is strong, or labor is strong and inflation is steady. There is no clear path toward a rate cut at this time and that has gold traders on edge. Given the history of the Fed, inflation is the fight, but why take the chance to cut rates to save jobs if it means higher inflation?

June Is Now the Focus

With the market 90% confident the Fed will pass on a March rate cut, the focus shifts to the June FOMC meeting. Even then, traders are only looking at a 50/50 chance of a cut. That is still not enough to generate major buy signals in gold. However, the appointment of Kevin Warsh as the new Fed chairman could change sentiment for gold traders if he strongly supports President Trump’s push to lower interest rates.

Where Is the Value?

Technically, during gold’s current consolidation phase, it looks as if traders are still searching for value and in my opinion it is getting closer, because the 50-day moving average is beginning to slice higher.

My value area for gold buyers is the retracement zone at $4,744.34 to $4,541.88. Inside this zone sits the 50-day moving average at $4,658.49.

I have seen the aggressive taking of offers since the speculative bubble broke three weeks ago, so I have to conclude that gold specs are looking for value at this time.

More Information in our Economic Calendar.