Price of Gold Fundamental Daily Forecast – Bears Looking to Sell Rallies at Current Price Levels

Gold futures are edging higher on Wednesday amid easing Treasury yields following a test of a seven week low the previous session. However, a firm U.S. Dollar may be capping gains. Despite the early strength, the risks remain skewed to the downside due to concerns the Fed might begin dialing back its stimulus in November and raising interest rates sooner than expected.

At 11:45 GMT, December Comex gold is trading $1745.60, up $8.10 or +0.47%.

The trend is down but sellers let up on the pressure at $1727.80 on Tuesday just slightly above a major technical level at $1716.00. Our work suggests gold prices will move lower into the end of the year, but sellers may not want to short weakness at current price levels. They prefer shorting rallies in order to get more bang for their buck.

10-Year Treasury Yield Retreats after Rapid Rise, Hovers Just Under 1.50%

The 10-year U.S. Treasury yield retreated on Wednesday, taking a pause in its rapid run that has unnerved financial markets.

The yield on the benchmark 10-year Treasury note fell by 2.8 basis points to 1.508%. The yield on the 30-year Treasury bond shed more than 1 basis point to 2.058%.

US Dollar Continues Impressive Rally

The U.S. Dollar is surging into its highest level of the year on Wednesday amid a combination of rising yields and higher expectations about the Federal Reserve starting to withdraw policy support. A stronger greenback tends to reduce foreign demand for dollar-denominated gold.

Hawkish Fed Speakers are Helping to Cap Gains

The Federal Reserve should let its roughly $8 trillion balance sheet shrink next year as soon as it winds down a bond purchase program, St. Louis Federal Reserve President James Bullard said, cautioning high inflation may require more aggressive steps by the central bank including two interest rate hikes in 2022.

In congressional testimony, Fed Chair Jerome Powell said the U.S. economy was still far from achieving maximum employment, a key component of the central bank’s requirements for raising interest rates.

Daily Forecast

I have to admit that I’m a little stumped with Powell’s comment about maximum employment. What did he mean by it? Did he just tell the markets that the Fed could delay a rate hike because of weak unemployment?

Powell is due to speak again on Wednesday, at 15:45 GMT, on a policy panel discussion at the European Central Bank Forum.

In economic news, the number of home sales pending in August is set to be released at 14:00 GMT. FOMC Member Bostic is also scheduled to speak at 18:00 GMT.

Although Treasury yields are likely to rise further by the end of the year, over the short-run we could see some choppiness. This could lead to a choppy trade in gold.