Price of Gold Fundamental Daily Forecast – Traders May Square Positions Ahead of Fed Announcements

Comex gold futures hit a one-month high on Monday before sellers came in to drive the market lower at the close. The market was supported early in the session by a weaker dollar and worries about the political uncertainty in the U.S.

The sell-off late in the session was attributed to a rebound in the U.S. Dollar and position-squaring ahead of the Fed’s interest rate decision and monetary policy statement on Wednesday. The dollar may have been helped by better U.S. economic news.

December Comex Gold futures settled at $1260.70, down $0.30 or -0.02%.

In other news, U.S. home resales fell more than expected in June as a shortage of properties lifted house prices to a record high. According to the National Association of Realtors, existing home sales dropped 1.8 percent to a seasonally adjusted annual rate of 5.52 million units last month.

The HIS Markit Flash U.S. Composite PMI hit its highest level in six months, HIS said in a release the growth in business activity was driven “by a steeper increase in manufacturing production in July.”

The Flash Manufacturing PMI was 53.2, above the 52.3 estimate and 52.0 read in May. Flash Services PMI came in at 54.2, slightly below the 54.3 forecast. May’s number was revised to 54.2.

Forecast

The gold market could be rangebound today as investors await Wednesday’s U.S. Federal Reserve interest rate decision and monetary policy statement. The Fed is widely expected to leave interest rates unchanged. According to the latest reading of the CME Group’s FedWatch tool, only about 3.1 percent of traders expected the central bank to lift interest rates.

Most investors will be watching the Fed statement for clues as to the timing of the next Fed rate hike and perhaps its assessment of the economy especially its inflation outlook.

In other news, investors will get the opportunity on Tuesday to react to the latest economic data on housing and manufacturing. The most important news is the Conference Board’s Consumer Confidence report. It is expected to come in slightly lower than the previous read at 116.5.

Also on Tuesday, Majority Leader Mitch McConnell has the Senate set to vote Tuesday on the first major test for the GOP effort to repeal and replace Obamacare. It’s only a vote on the motion to proceed to debate and amendments on the House-passed health care bill. However, this news may trigger a volatile reaction in the financial markets so it should be monitored.

Gold posted a potentially bearish technical reversal on the chart on Monday. This was likely fueled by position-squaring and light profit-taking. The market is also trading inside a key retracement zone at $1258.30 to $1269.40. Trader reaction to this zone will determine the near-term trend of the market.