Price of Gold Fundamental Daily Forecast – Could See Tentative Trade Until Fed’s Mid-December Policy Meeting

Gold futures retreated on Thursday but continued to consolidate just under a five-month high reached earlier in the week. Investors have been reluctant to buy strength after last week’s breakout over $1939.00. And do you blame them. Three times in the last week buyers tried to breakout over a previous high, only to be met with a wave of selling pressure from profit-takers and short-sellers.

We’re at the line-in-the-sand in my opinion at $1874.00 where bullish investors have to sustain a move over this level in order to drive the market into $1919.10 – $1922.00 or face a minimum pullback to $1839.00.

On Thursday, December Comex gold futures settled at $1861.40, down $8.80 or -0.47%.

Earlier in the week it was a stronger-than-expected U.S. retail sales report and hawkish comments from Fed officials that capped gold prices. On Thursday, gains were limited by weekly U.S. jobless claims data that led traders to strengthen bets for an earlier-than-expected rate hike by the Federal Reserve.

US Retail Sales Surge Brightens Economic Outlook While Supporting Early Fed Rate Hike

U.S. retail sales surged in October as Americans eagerly started their holiday shopping early to avoid empty shelves amid shortages of some goods because of the ongoing pandemic, giving the economy a lift at the start of the fourth quarter.

The solid report from the Commerce Department on Tuesday suggested high inflation was not yet dampening spending, even as worries about the rising cost of living sent consumer sentiment tumbling to a 10-year low in early November.

This was actually good news for hawkish Federal Reserve members who were worried an aggressive rate hike strategy would dampen economic growth more than necessary.

Fed Inflation Debate Fueling Rate Hike Uncertainty

One of the reasons for the volatile rangebound trade in gold over the past week has been the public debate among Federal Reserve policymakers over how to respond to high inflation.

San Francisco Federal Reserve Bank President Mary Daly on Tuesday called for central bank patience, saying price pressures will likely fade on their own as the pandemic recedes.

“Reacting in response to things that aren’t likely to last will move us farther from – not closer to – our goals,” Daily told the Commonwealth Club of California.

St. Louis Fed President James Bullard took the opposite urging a quicker end to the Fed’s asset purchases to put the Fed in a position to raise rates as soon as next spring.

Short-Term Outlook

Continue to look for heightened volatility and a two-sided trade until the Fed reveals its rate hike timetable. This may not be until its mid-December policy-setting meeting.

However, if there are signs of a faster tapering before the meeting then this will signal the Fed may raise rates before July 2022.