Price of Gold Fundamental Daily Forecast – Dovish Fed Could Spike Prices Through $1256.60 with Eyes on $1284.10 Over Near-Term

Gold prices are trading lower on Wednesday, reversing earlier gains. The move is likely being fueled by position-squaring ahead of the U.S. Federal Reserve’s interest rate and monetary policy decisions as well as the Federal Open Market Committee’s (FOMC) dot-projections and post-meeting remarks from Fed Chairman Jerome Powell. Basically, the market is in a holding pattern with all eyes on the Fed announcements at 1900 GMT.

At 1015 GMT, February Comex gold futures are trading $1251.70, down $1.90 or -0.15%.

The most widely watched event on Wednesday by gold traders will be the monetary policy decision by the U.S. Federal Reserve. The central bank is widely expected to raise its benchmark interest rate for a fourth time this year by 25 basis points, bringing it to 2.50%. That being said, traders aren’t too concerned about this move because it has been priced into the markets for several weeks.

Although it would be a surprise if the Federal Open Market Committee decided to pause their rate hikes, the real question investors are asking is what message will the Fed policymakers convey about the path of interest rates moving forward. That answer is likely to be revealed in their dot projections.

Will the FOMC members lower the dot projection from three rate hikes to two in 2019, or will they even take a more dovish stance?

So as a gold investor, the real focus should not be on the December rate hike, but on what the outlook for 2019 and 2020 looks like.

Forecast

If the Fed comes across as dovish, then look for Treasury yields to fall, making the U.S. Dollar a less-desirable asset. This should increase investor appetite for dollar-denominated gold. The first target is last week’s high at $1256.60. If the buying is strong enough to take out this top then look for a potential acceleration to the upside since the next major target comes in at $1284.10.