Price of Gold Fundamental Daily Forecast – Early Strength Suggests Powell Won’t Be Rattled by Inflation Surge

Gold futures are edging higher on Wednesday, supported by a dip in U.S. Treasury yields and a weaker U.S. Dollar. The price action seems to suggest that investors may be giving Federal Reserve Chairman Jerome Powell the benefit of the doubt that he will stick to the script and say that the rise in inflation is only temporary when he testifies before Congress later today. His testimony comes a little more than 24 hours after the U.S. government reported a spike in consumer inflation in June.

At 09:13 GMT, August Comex gold is trading $1815.00, up $5.10 or +0.28%.

Treasury Yields Ebb Lower Ahead of Fed Chair Powell Testimony

U.S. Treasury yields ebbed lower on Wednesday, ahead of Federal Reserve Chairman Jerome Powell’s testimony in front of Congress later in the day.

The yield on the benchmark 10-year Treasury note fell 1 basis point to 1.407%. The yield on the 30-year Treasury bond dipped 1 basis point to 2.026%.

Dollar Climb Takes a Breather Before Powell Testimony

The U.S. Dollar retreated marginally against a basket of major currencies on Wednesday, after data a day earlier showed inflation had scaled 13-year highs in June amid supply constraints and higher travel-related costs.

The greenback is likely to take its direction from Fed Chair Jerome Powell’s two-day testimony before Congress which starts later on Wednesday.

Tuesday Recap:  Government Reports Biggest Inflation Jump in Years

Inflation surged in June at its fastest pace in nearly 13 years amid a burst in used vehicle costs and price increase in food and energy, the Labor Department reported Tuesday.

The consumer price index increased 5.4% from a year earlier, the largest jump since August 2008, just before the worst of the financial crisis. Economists surveyed by Dow Jones had been expecting a 5% gain.

Stripping out volatile food and energy prices, the core CPI rose 4.5%, the sharpest move for that measure since September 1991 and well above the estimate 3.8%. On a monthly basis, headline and core prices rose 0.9% against 0.5% estimates.

Daily Forecast

A Fed report released Friday, that Chairman Jerome Powell will present to Congress this week, reiterated the central bank’s position that the current inflationary pressure are “transitory.”

Traders will be looking for any change in Powell’s dovish stance, which appears unlikely.

If Powell appears even a touch more hawkish, U.S. Treasury yields and the U.S. Dollar will jump again. This could drive gold prices lower.

Should Powell remain confident that the current rising inflation is transitory, traders will likely give him the benefit of the doubt. This would be supportive for gold prices.