Price of Gold Fundamental Daily Forecast – Dovish Surprise in Fed Minutes Could Spike Prices Higher

Gold futures are trading flat on Wednesday, shortly ahead of the regular session opening. Helping to underpin prices are a weaker U.S. Dollar and a dip in Treasury yields. Keeping a lid on gold are firmer U.S. equity prices and general uncertainty ahead of the release of the U.S. report on consumer inflation and the Fed minutes later in the session.

At 10:10 GMT, June Comex gold is trading $1308.30, unchanged.

Supported by IMF Global Economic Downgrade

Gold prices were boosted on Tuesday after the U.S. Dollar weakened in reaction to a report from the International Monetary Fund (IMF), which raised concerns over a global economic slowdown. The IMF slashed its global growth forecast for 2019 to 3.3 percent, the slowest expansion since 2016 and from its earlier projection of 3.5 percent in January. The IMF added that it expects the economy to expand to 3.6% in 2020, however.

“The balance of risks remain skewed to the downside,” the IMF said. “Failure to resolve differences and a resulting increase in tariff barriers above and beyond what is incorporated into the forecast would lead to higher costs of imported intermediate and capital goods and higher final goods prices for consumers.”

“Higher trade policy uncertainty and concerns of escalation and retaliation would reduce business investment, disrupt supply chains, and slow productivity growth,” according to the IMF. “The resulting depressed outlook for corporate profitability could dent financial market sentiment and further dampen growth.”

Daily Forecast

On Wednesday, gold prices are likely to be influenced by the European Central Bank’s monetary policy decision, the U.S. report on consumer inflation and the release of the minutes from the Federal Reserve’s monetary policy meeting.

European Central Bank Decision

The European Central Bank (ECB) is widely expected to keep policy on hold on Wednesday, taking a break from its recent decision to implement more stimulus measures. ECB policymakers are likely to discuss market speculation about further delays to their first post-crisis rate hike and the side effects of years of negative rates.

U.S. Consumer Inflation Data

The U.S. Consumer Price Index is expected to have risen by 0.3%. The Core CPI is expected to have risen by 0.2%. Traders are saying the biggest influence on inflation has been the rise in gasoline prices.

Fed Minutes

Traders will be looking for information on just how dovish the Federal Open Market Committee has become and whether policymakers discussed the possibility of a rate cut later in the year. Traders will also be looking for additional details on the Fed’s plan to stop reducing its balance sheet. Investors will also be looking for Fed member comments on the weakening economic data and if they see a trend developing in the data. Overall, the minutes are expected to be dovish, but that may have already been priced into the market.

Look for gold prices to rise if the Fed minutes reveal a dovish surprise.