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Price of Gold Fundamental Daily Forecast – A Hawkish Powell Could Crush Gold Prices

By:
James Hyerczyk
Published: Aug 24, 2018, 09:01 UTC

Once again the direction of gold prices today will be determined by the movement in the U.S. Dollar. Moving the dollar today could be a speech by Federal Reserve Chairman Jerome Powell at 1400 GMT on Friday. Investors will be watching Powell’s words closely for any clues on the pace of the interest-rate hikes or his insights on the impact of tariffs, and U.S. economic growth. Gold prices could fall further today if Powell comes across as hawkish.

Comex Gold

Gold futures are trading nearly flat on low volume shortly before the U.S. regular session opening. Buyers are trying to sustain the momentum created by last week’s dramatic reversal, however, they face headwinds from expectations of higher U.S. interest rates and a strengthening U.S. Dollar in reaction to the lingering trade dispute between the United States and China.

At 0844 GMT, December Comex Gold futures are trading $1197.00, up $3.00 or +0.25%.

Gold reached its top this week after the Fed minutes showed support for a further interest-rate hike in the near term, but also revealed concerns that escalating trade wars could harm the U.S. economy.

In other news, U.S. and Chinese officials ended two days of low level trade talks on Thursday with no major breakthrough as their trade war escalated with activation of another round of tariffs on $16 billion worth of each country’s goods.

Worries about the trade war escalating has been supportive for the dollar due to safe haven buying. This has helped put pressure on dollar-denominated gold.

Gold hit a multi-year low on August 15 at $1167.10, leading to a surge to $1208.40. However, the rally was likely fueled by aggressive short-covering due to oversold conditions. As of August 14, according to government trading data, hedge funds and money managers were sitting in record net short gold positions. They began to cover some of these positions when the financial turmoil in Turkey subsided.

With rates expected to rise and the trade war expected to linger, the dollar may firm again which would put renewed pressure on gold prices.

Forecast

Once again the direction of gold prices today will be determined by the movement in the U.S. Dollar. Moving the dollar today could be a speech by Federal Reserve Chairman Jerome Powell at 1400 GMT on Friday. Investors will be watching Powell’s words closely for any clues on the pace of the interest-rate hikes or his insights on the impact of tariffs, and U.S. economic growth. Gold prices could fall further today if Powell comes across as hawkish.

At 1230 GMT, investors will also have the opportunity to react to the U.S. Core Durable Goods Orders and Durable Goods Orders reports.

Core Durable Goods Orders are expected to rise 0.5%, up from a disappointing 0.2%. Durable Goods Orders are expected to show a drop of 0.7%. Last month’s report showed a 0.8% gain.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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