Price of Gold Fundamental Daily Forecast – Bulls in Control With No Major Worries Until Fed’s Nov Meeting

Gold futures are edging lower early Friday after touching a one-month high the previous session. The market is currently straddling the pair of 50% levels at $1795.00 and $1800.00 that should determine the next major move in the market.

At 07:01 GMT, December Comex gold futures are trading $1792.40, down $5.50 or -0.31%.

As I mentioned in Thursday’s comments, the chart pattern looks bullish and I wouldn’t be surprised if gold continued to rise into the November 2-3 Federal Reserve meeting. After the release of the Fed minutes on Wednesday that clearly indicted its intent to begin tapering its massive stimulus in November, what else is there before the Fed’s monetary policy statement?

On Thursday, gold traders even ignored the better-than-expected U.S. Weekly Initial Claims numbers. They don’t want to hear about good news that moves the Fed closer to tapering and a rate hike, they want to dwell on rising inflation, which is their right. This is short-term trading at its best. It’s also contrarian because everyone seemed to be bearish gold when the Fed started talking about tapering, and moving up the date of its first rate hike.

Sometimes one has to be willing to accept the fact that money moves a market better than headlines, but in the long-run the headlines calling for tapering and rate hikes will win. So enjoy the ride.

Since the release of the hawkish Fed minutes, yields have dipped and the U.S. Dollar has weakened. But does it represent a change in sentiment or buy the rumor, sell the fact? I tend to lean toward the latter.

The Fed may have miscalculated its assessment of inflation when it called the rise “transitory”, but they didn’t lie. Just like they’re not lying when they said they have to the tools to fight inflation.

There is no question that gold is being supported by rising inflation, but if you ignore rising Treasury yields, you’re taking on a lot of risk. The Fed has the power to raise rates as fast or slow as they want. They just haven’t told us when they are going to raise, and how fast they are going to move. Once that is revealed, gold will have a hard time sustaining the rally. Fortunately for the bulls, they still have a little more than 2 weeks before that news may be revealed.

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