Price of Gold Fundamental Daily Forecast – Expecting Limited Price Action Ahead of Powell Speech, Fed Minutes

Gold futures are nearly flat early Tuesday after posting a small gain the previous session. The steady trade is being attributed to a stable U.S. Dollar after a slide in the greenback the previous session drove dollar-denominated bullion to its highest level in two weeks. A dip in U.S. Treasury yields is helping to limit losses.

At 02:11 GMT, August Comex gold futures are trading $1854.70, up $0.80 or +0.04%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $172.84, up $0.81 or +0.47%.

Gold Prices Limited by Rising Global Interest Rates

There were no major changes to the fundamentals on Monday. Traders are still counting on the Federal Reserve to raise its benchmark rate by 50-basis points in both June and July. The current rally is not being driven by the outlook for the Fed, but rather profit-taking in the 10-year U.S. Treasury bond and the U.S. Dollar Index.

There is still some room on daily chart to rally, but with the theme still tied to higher interest rates, gold is not expected to turn bullish.

In addition to the Federal Reserve and Reserve Bank of Australia (RBA) raising rates earlier in the month, the Reserve Bank of New Zealand (RBNZ) is expected to hike its benchmark interest rate by 50-basis points on Wednesday.

Furthermore, traders are now expecting the European Central Bank (ECB) to begin raising rates in September.

Gold’s gains are expected to remain capped because higher yields tend to weigh on demand for non-yielding bullion.

Monday Recap:  Treasury Yields Rise, Fed Remains Hawkish

U.S. Treasury yields rose on Monday as concerns about inflation and economic growth remained in focus for investors. The yield on the benchmark 10-year Treasury note climbed 7 basis points to 2.866%. The yield on the 30-year Treasury bond moved 7 basis points higher to 3.072%.

Kansas City Federal Reserve Bank President Esther George said on Monday she expects the U.S. central bank to lift its target interest rate to about 2% by August, with further action dependent on how both supply and demand are affecting inflation.

Daily Forecast

There were no major economic releases on Monday. However, investor focus is likely to be on a speech by Federal Reserve Chairman Jerome Powell, scheduled for Tuesday.

We could see a volatile reaction if Powell addresses inflation and how aggressive the Fed is likely to be in fighting it.

However, limiting the price action could be the Federal Open Market Committee (FOMC) Meeting minutes, due to be released on Wednesday. Traders are expecting the minutes to offer more details about the Fed’s future plans, and hence we’ll probably see a stronger reaction in Treasurys, the Dollar and gold.