Price of Gold Fundamental Daily Forecast – U.S. Economic Strength, Muted Inflation Make Gold Less Desirable Investment

In its policy statement released on Wednesday, the Fed signaled it would continue to take a pause in its rate hikes. This surprised gold traders who were pricing in a more dovish Fed and a possible rate hike before the end of the year.

At 09:29 GMT, June Comex gold futures are trading $1272.00, down $12.20 or -0.95%.

To recap the events from Wednesday, Federal Reserve policymakers voted to hold interest rates unchanged, citing a lack of inflation pressure. Central bankers also acknowledged the economy was growing strongly.

The Fed held its benchmark rate in a target between 2.25% and 2.5%. The vote by policymakers was unanimous. The Federal Open Market Committee did, however, make a technical adjustment aimed at keeping the funds rate closer to the midpoint of the target range.

The change means that interest paid on excess reserves that banks keep at the Fed will now be set at 2.35%, or 0.05 percentage points lower than before. According to CNBC, “Prior to two similar adjustments last year, the Fed had been raising the funds rate and reserves rate in tandem, with the latter acting as a cap for the benchmark rate.”

Fed Tweaking

About the economy, the Fed tweaked some of the language from its March policy statement to indicate that growth remains strong.

The new statement said “economic activity rose at a solid rate” while again noting that job gains “have been solid” and that the unemployment rate “has remained low.” The jobless rate is at 3.8%, close to its lowest level in 50 years.

In regards to inflation, the Fed said “market-based measures of inflation compensation have remained low in recent months.”

Inflation Running Below Target

The FOMC also said, “On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2-percent,” the statement said. After the March meeting, the committee chalked up the inflation weakness to lower energy prices.

Daily Forecast

How can one argue against lower gold prices given that inflation is well below the Fed’s 2% target, the Dow Jones Industrial Average is up about 14% in 2019 and the S&P 500 Index and NASDAQ Composite hit record highs earlier this week? Furthermore, the jobless rate is near its lowest level in 50 years, GDP rose 3.2% during the first quarter and nonfarm payrolls remain strong despite a glitch in February.

Additionally, the government survived a shutdown, Trump survived the Mueller investigation, Brexit has been a non-event and the U.S and China are close to ending the trade dispute.