Price of Gold Fundamental Daily Forecast – Drifting Lower on Rising Treasury Yields, Demand for Risk

Buyers are continuing to shed gold positions early Monday ahead of this week’s U.S. Federal Reserve monetary policy meeting. On Wednesday, the Fed will release its interest rate decision, its monetary policy statement and economic forecasts.

Most investors expect the Fed to leave its benchmark interest rate unchanged at<1.25. Currently, the market is giving it a 1.4% chance of a rate hike.

The Fed is also expected to release some of the details of its plan to trim its balance sheet. The plan is likely to call for the start of the reduction process in October. Reducing the balance sheet is a form of monetary policy tightening. Rather than shock the market with an aggressive move, the Fed is likely to announce a gradual reduction.

This news may be enough to stabilize the U.S. Dollar over the short-term which should put pressure on gold prices. Although the era of loose money is slowly coming to an end, stocks should continue to be underpinned especially if President Trump delivers his long-awaited tax reform package. Strong demand for higher risk assets should also keep pressure on gold prices.

Underpinning the market is the North Korean threat. Over the week-end, U.S. Ambassador to the United Nations Nikki Haley said the U.N. Security Council has run out of options on containing North Korea’s nuclear program and the United States may have to turn the matter over to the Pentagon.

Forecast

Rising Treasury yields and increasing demand for higher risk assets should continue to keep the pressure on gold prices on Monday.

The key area to watch is $1321.90 to $1312.30. Since the trend is up on the daily chart, we may see buyers show up on a test of this zone. Therefore, we won’t be surprised by a technical bounce today.

Minor reports include NAHB Housing Market Index and TIC Long-Term Purchases.