Price of Gold Fundamental Daily Forecast – Cautious Trade after Fed Maintains Hawkish Stance

James Hyerczyk
Gold Bars and Dollar
Gold Bars and Dollar

Gold prices continue to slide on Friday, driven lower by the strengthening U.S. Dollar. This has put the market in a position to post its biggest weekly drop since the middle of August. The catalyst behind the weakness is the U.S. Federal Reserve.

On Thursday, the Fed indicated in its monetary policy statement that it will continue to raise interest rates. This made the U.S. Dollar a more attractive investment while lower foreign demand for dollar-denominated gold.

At 0959 GMT, December Comex Gold is trading $1221.00, down $4.10 or -0.33%.

On Thursday, the Fed kept the Federal Funds rate unchanged, but maintained its hawkish stance, leaving its call for a December rate hike intact.


Traders should remain cautious as gold rapidly approaches the key support zone at $1215.20 to $1207.90. This zone stopped the selling at $1213.40 on October 31. It represents 50% to 61.8% of the rally from $1184.30 to $1246.00. There is no guarantee that buyers will show up second time to stop the price slide.

Another target is $1206.50. This price presents 50% of the entire August to October rally from $1167.10 to $1246.00.

You can see why gold traders should be cautious. The fundamentals and the technical picture look bad. There is no catalyst in the market at this time that screams, “Buy Gold Now”.

On Friday, investors will get the opportunity to react to U.S. producer inflation. The PPI is expected to show a 0.2% rise. Core PPI is also expected to come in 0.2% higher.

FOMC Member Quarles is also scheduled to speak.

The Preliminary University of Michigan Consumer Sentiment report is expected to come in slightly lower at 98.0, down from 98.6. Final Wholesale Inventories are expected to rise 0.3%.

The big three:  Treasury yields, the U.S. Dollar and demand for risk should continue to control the price action in gold on Friday.

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