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James Hyerczyk
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Comex Gold

Gold futures are inching higher early Wednesday, but the low volatility and volume suggests many of the major players are sitting on the sidelines ahead of Friday’s U.S. Non-Farm Payrolls report.

With the Fed not scheduled to meet until September 21-22, gold traders are being forced to extract guidance from economic reports and Fed speakers. However, there are some traders who believe the Fed may announce its plan to begin tapering at the August 26-28 central bankers’ summit at Jackson Hole, Wyoming.

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That’s a stretch, in my opinion, since tapering is a major deal. I don’t think the Fed would use the summit to grab headlines since it would get the headline anyway. Furthermore, I think most Federal Open Market Committee (FOMC) members would like to take a look at two months of U.S. labor market data before making a decision.

At 07:11 GMT, December Comex gold futures are trading $1816.60, up $2.50 or +0.14%.

Fed’s June 16 Decision Capping Gains

Although volatility and volume are relatively low, and the price action a little boring lately, the movement makes sense since the Fed really didn’t say anything major on July 29 after moving up its timeline for its next rate hike in the June 16 monetary policy statement.

If you recall, the June 16 announcement triggered a steep break. Gold closed at $1865.30 that day. This tells me that in order to fuel a rally strong enough to overtake this price, the Fed is going to have to come in extremely dovish in late September.

However, since the Fed has emphasized that the strength in the jobs market will determine its decision on tapering, investors will likely know if the job market has recovered enough to warrant the move. I don’t expect the players in gold to take a major position ahead of the Fed meeting in September until they see Friday’s July Non-Farm Payrolls report and the August Non-Farm Payrolls report in September.

In the meantime, the price action is likely to be driven by economic reports and Fed speakers.

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Daily Forecast

Gold traders should take notice of what happened in Australia on Tuesday and in New Zealand earlier today.

On Tuesday, the Reserve Bank of Australia (RBA) decided to stay on track to begin tapering its bond purchases in November, despite an expected slowdown in the economy due to shutdowns fueled by the COVID-Delta variant. This was a hawkish move.

Earlier today, New Zealand employment data came in better than expected. This raised the chances of a Reserve Bank (RBNZ) rate hike on August 18. This will also be a hawkish move.

Both hawkish moves could limit gold’s upside potential.

In the U.S. on Wednesday, traders will get the opportunity to react to the National Employment Report by payroll processor ADP, due later today at 12:15 GMT. The report could set the stage for the much anticipated U.S. Non-Farm Payrolls numbers on Friday.

For a look at all of today’s economic events, check out our economic calendar.
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