Price of Gold Fundamental Daily Forecast – Buyers Facing US Stimulus Hurdle Ahead of Fed Decisions

Gold futures are trading flat on Tuesday with gains being capped by a firmer U.S. Dollar and uncertainty over a U.S. stimulus package. Also helping to hold prices in a range is indecision ahead of Wednesday’s U.S. Federal Reserve interest rate and monetary policy announcements. Slightly higher Treasury yields are also helping to limit gains.

At 14:12 GMT, April Comex gold futures are trading $1860.30, up $1.30 or +0.07%.

US Stimulus Headwinds

U.S. President Joe Biden’s $1.9 trillion pandemic relief proposal faces hurdles as Republicans objected to it for being too expensive and pushed for a smaller plan targeting vaccine distribution.

“We are trying to calibrate not just the amount but the timing of new stimulus, and both of those, side by side are almost impossible to analyze,” said Art Hogan, chief market strategist at National Securities in New York.

“If you look at the (stock) market’s reaction post-election, part of the ramp we have seen, and it’s been pretty significant, has been on the back of likely stimulus and the timing, which is sooner rather than later. Now we have to reset our thinking.”

The same goes for gold. Traders have been pricing in additional stimulus for weeks, but it continues to get pushed down the road.

US Federal Reserve Announcements

Fed policymakers have little doubt that costs for many goods and services will jump this year, a bitter pill for consumers if gasoline, travel and other prices start to rebound from sharp declines last year. But, Fed officials argue, that’s part of getting back to normal, not the start of a more persistent inflation problem.

“As people return to their normal lives … there could be quite exuberant spending and we could see upward pressure on prices,” Fed Chair Jerome Powell told a Princeton University seminar earlier this month.

“The real question is how large is that effect going to be and will it be persistent?” Powell said. “A one-time increase in prices … is very unlikely to mean persistently high inflation.”

Powell and other Fed officials will likely reinforce that message after their two-day policy meeting this week.

Few if any changes are expected to the Fed’s policy statement and no new economic forecasts are scheduled to be released.

Daily Forecast

Trading volume is light ahead of Wednesday’s Fed announcements, but if there is any significant movement it will be triggered by the movement in Treasury yields and the U.S. Dollar. A bullish tone could develop on a sustained move over $1849.70. The bias could shift to the downside if $1843.00 fails as support.

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