Price of Gold Fundamental Daily Forecast – Dovish Fed Could Force Net Short Money Managers to Cover Aggressively

Gold futures are inching lower early Wednesday. The market is trading in a narrow range and volume is well below average. The major players are on the sidelines ahead of today’s U.S. Federal Reserve’s interest rate decision, monetary policy statement, economic projections and pressure conference at 1800 GMT. Policymakers are widely expected to raise rates by 25 basis points for the third time this year.

At 0639 GMT, December Comex Gold is trading $1204.60, down $0.40 or -0.03%.

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Forecast

At the conclusion of the Fed’s two-day policy meeting on Wednesday, the central bank is widely expected to raise its benchmark interest rate for the eighth time since December 2015. Investors have been counting on this rate hike for weeks, and have also begun to price in another rate hike in December. However, the number of rate hikes in 2019 remains a mystery.

The focus of Wednesday’s monetary policy statement and economic projections will be on the Fed policy outlook and on any comments surrounding the global trade dispute and its potential impact on future economic growth.

Investors will be watching closely to see if the Fed provides any signals as to where monetary policy will be heading over the coming months into next year.

The market is fearful that dovish rate hikes are a thing of the past. Traders will be watching the policy statement to see if the central bank removes the word “accommodative”. This would mean that the days of gradual rate hikes may be over. However, the Fed has to be careful with how it phrases things because it doesn’t want to crash the stock market, or stop economic growth.

A dovish Fed message will be bearish for the U.S. Dollar and bullish for gold. Since the hedge funds and money managers are net short the market, a dovish Fed will force them to cover aggressively.

If traders perceive a hawkish Fed message then look for sellers to hit the gold market hard.

Technical factors could also play a major role in the direction of the gold market today. The market has been rangebound since mid-August and investors may be waiting for bullish or bearish news to trigger the next major move.

The technical pivot is $1205.90. Trader reaction to this level should set the tone for the session. The trigger point for a breakout to the upside is $1220.70. The trigger point for an acceleration to the downside is $1187.60.