Price of Gold Fundamental Daily Forecast – Direction to be Determined by Fed’s Tone

Gold futures are trading higher on Wednesday after another successful test of the lower end of its three-week trading range. We could be looking at position-squaring ahead of the release of the ADP Non-Farm Employment Change report at 12:15 GMT and the Advance GDP report at 12:30 GMT. However, investors are likely making adjustment because of general uncertainty ahead of the U.S. Federal Reserve interest rate and monetary policy decisions at 18:00 GMT.

At 11:45 GMT, December Comex gold is trading $1495.50, up $4.80 or +0.33%.

U.S. Economic Data

The ADP Non-Farm Employment Change report is expected to show the private sector of the economy added 125K new jobs in October. This is down slightly from the 135K figure in September. Hitting the estimate will indicate job growth is slowing, but is not likely to be major concern.

Advance GDP is expected to come in at 1.6%. This isn’t going to be a surprise because the trade war has taken its toll on the economy.

Furthermore, the Fed already cut twice this year and is expected to cut again later today. Traders realize that the lower rates need some time to work through the economy. I don’t expect much of a reaction by gold traders to the numbers unless there is a serious miss to the downside.

U.S. Federal Reserve

Look for the Fed to cut its benchmark rate 25 basis points. This has been in the market for weeks. No surprises there. The market also expects the Fed to signal that it will hit the pause button for December and likely hint at one rate cut next year.

According to the CME Group’s FedWatch tool, traders see about at 30% chance of another cut in December. This is down from 70% earlier in the month.

U.S.-China Trade Relations

Helping to keep a lid on gold prices is the hope of a partial trade deal between the U.S. and China before the middle of November. The timing of the signing of the trade agreement seems to be a concern for investors. It’s probably because of comments from President Trump. He said earlier in the week that the negotiations are moving along faster than anticipated.

Hope that Washington and Beijing would finalize the first-stage of a trade deal in November had boosted risk assets in recent days, but traders are now worried on the prospect this could be delayed. A U.S. administration official said on Tuesday an interim trade agreement between the United States and China might not be completed in time for signing on the sidelines of an Asia-Pacific summit in Chile next month, but that does not mean the accord is falling apart.

The timing of the signing of the trade deal should not become an issue. If you recall, on October 21, U.S. Commerce Secretary Wilbur Ross said the initial trade deal does not need to be finalized next month.

“It has to be the right deal, and it doesn’t have to be in November,” Ross told Fox Business Network in a television interview. “It’s more critical that it be a proper deal that exactly when it occurs.”

He went on to say, “The key thing is to get everything right that we do sign. That’s the important element. That’s what the president is wedded to do.”

“Whether it’s this day or that day might be interesting to the media, but it isn’t the real game,” Ross said.

Daily Forecast

The direction of gold prices today comes down to the tone of the Federal Reserve. If it presents a hawkish tone, i.e. only one or no cuts in 2020, then look for gold prices to weaken. If the Fed is dovish, i.e. more than one cut in the future, then gold could rally.