Price of Gold Fundamental Daily Forecast – Focus on Slew of Fed Speakers after Bullard’s Hawkish Tone

Gold futures are edging higher on Wednesday as Treasury yields eased lower and the dollar fell from its high against other major currencies. The follows a dramatic technical reversal top from the previous session.

We don’t want to read into yesterday’s price action too much, but a closing price reversal top following a prolonged move up in terms of price and time is a potentially bearish signal. Especially when the chart pattern is supported by stronger-than-expected domestic data, rising Treasury yields, a soaring U.S. Dollar and increasing expectations of a sooner-than-expected rate hike by the Federal Reserve.

At 11:01 GMT, December Comex gold futures are trading $1861.60, up $7.50 or +0.40%.

Today’s rebound in prices suggests investors are still fearful of persistent inflation, however, higher rates and a stronger dollar are pinpointing the reasons why there remains potential risk for gold traders. Additionally, several statements from Fed members this week suggest they are turning a little hawkish in regards to interest rate hikes in 2022.

Treasury Yields, Dollar Climb as Upbeat US Data Stokes Rate Hike Bets

Treasury yields and the U.S. Dollar jumped on Wednesday, as strong retail sales fueled earlier Federal Reserve rate hike expectations.

With inflation running high, the data boosted expectations of a rate hike as early as mid-2022. Investors also said the data could encourage the Fed to accelerate the tapering of its asset purchase program.

Bullard Says Fed Should Tack “Hawkish” in Next Couple of Meetings

Although he won’t be a voter on Fed policy until next year, St. Louis Federal Reserve Bank President James Bullard often has a lot to say about the direction of interest as well as having a relatively large following.

On Tuesday, Bullard said the Federal Reserve should “tack in a more hawkish direction” over the next couple of meetings to prepare in case inflation does not begin to ease.

“If inflation happens to go away we are in great shape for that. If inflation doesn’t go away as quickly as many are currently anticipating it is going to be up to the Federal Open Market Committee (FOMC) to keep inflation under control,” Bullard said on Bloomberg Television.

“The inflation rate is quite high,” Bullard said. “It behooves the committee to tack in a more hawkish direction in the next couple of meetings so that we are managing the risk of inflation appropriately.”

Daily Forecast

Gold investors are going to continue to monitor U.S. economic data and Federal Reserve member comments for clues as to the timing of the first post-pandemic rate hike. Today, six FOMC members have the chance to move the gold market along with reports on Building Permits and Housing Starts.

At this time, Fed officials are saying they don’t want to raise the benchmark interest rate until the taper is complete, which is currently set for June. Increasing the pace of the taper could mean a rate hike as early as March. It all depends on how aggressive the Fed wants to be.

For this reason, gold traders will be looking for Fed members to talk about the pace of tapering.