Price of Gold Fundamental Daily Forecast – Fed Minutes May Not Move the Needle Given the Surge in COVID Cases

Gold futures are inching higher on Wednesday with the price action basically mirroring similar movement in U.S. Treasury yields and the U.S. Dollar. Volume is on the light side with most of the major players on the sidelines ahead of the release of the minutes from the Fed’s July monetary policy meeting at 18:00 GMT.

At 13:48 GMT, December Comex gold is trading $1788.50, up $0.70 or +0.04%.

Despite headlines saying gold prices are being driven by safe-haven buying tied to the surge in coronavirus cases, the truth is the market is being underpinned by falling Treasury yields and capped by the stronger U.S. Dollar.

Uncertainty over Fed policy toward tapering its economic stimulus is being fueled by recently released weaker-than-expected economic reports. Meanwhile traders have wiped out the losses from the July non-farm payrolls report that had many short-sellers believing the Fed would announce its plans to taper at the August 26-28 central bankers’ summit at Jackson Hole, Wyoming.

Helping to underpin gold prices over the last week are the weaker-than-expected U.S. consumer inflation data and a plunge in consumer confidence.

Although gold has recaptured all of its losses fueled by the bearish non-farm payrolls report, it’s still trading lower for the month, which likely means investors are pricing in a hawkish move by the Fed…they just don’t know when they are going to do it.

Meanwhile some gold bulls believe that the August non-farm payrolls report will come in lower than the previous report. This is because of worries over the fast-spreading Delta COVID-19 variant.

There is growing support within the Fed to announce the tapering of bond purchases in September, but Fed Chairman Jerome Powell didn’t reveal much in his speech on Tuesday.

Powell said Tuesday that it remains unclear whether the heightened outbreak of the coronavirus Delta variant will have a noticeable impact on the economy.

Daily Forecast

Today’s Fed minutes may be just another meaningless report for traders. In the minutes from the July FOMC meeting, policymakers likely talked about the conditions for tapering – stable inflation and strong labor market growth – but this was before the latest outbreak of the coronavirus.

The conditions for tapering aren’t likely to change, but the actual outlooks for inflation and jobs growth may have changed. I don’t think we’re going to learn anything from the minutes that we didn’t already know. Therefore, I’m expecting a volatile, two-sided trade in gold until the next Fed meeting on September 21-22.

Economic data and Fed speakers will drive the price action. Before the next Fed meeting, we’re also going to see another NFP report as well as consumer inflation data.

Earlier today, the Reserve Bank of New Zealand (RBNZ) postponed its highly anticipated rate hike due to a COVID breakout in the country. The day before, the Reserve Bank of Australia (RBA) said it was willing to provide more stimulus to support the economy due to COVID-related lockdowns.

The Fed minutes may reveal the conditions the Fed needs to see to begin tapering, but the actual market conditions may be worse when the Fed meets in late September. So don’t read too much into the minutes, the news is stale given the new COVID threat.