Price of Gold Fundamental Daily Forecast – Gold Showing Muted Response to Summit Deal, Focus Shifts to CPI, Fed

Gold futures are trading lower, but inside yesterday’s range as investors digest the events that took place at the historic U.S.-North Korea summit. Despite the relatively good news, the price action suggests investor indecision and impending volatility.

This could be because investors still have a lot on their table including today’s U.S. consumer inflation report and Wednesday’s U.S. Federal Reserve interest rate decision, monetary policy statement and economic projections.

At 0930 GMT August Comex Gold futures are trading $1302.30, down $0.90 or -0.07%.

Although President Donald Trump and North Korean leader Kim Jong-un signed a historic agreement aimed at establishing a “peace regime” on the Korean peninsula and better relations between the two states, gold traders are showing little response to the deal.

Perhaps it is the lack of detail in the agreement that is fueling the muted response from investors. If it had been interpreted as bullish news, gold would have dropped sharply and appetite for risk would have increased.

Gold traders, at the very least, want to know what’s in the signed document that is basically a document enumerating goals for the two states. The document, which Trump deemed “very comprehensive,” says the two sides commit to hold follow-up negotiations and to cooperate to develop bilateral relations.

Traders are treating the document as an important first step toward a peaceful resolution to the major issues between the U.S. and North Korea rather than an end to the rogue nation’s nuclear program.

Later today, investors will get the opportunity to react to a series of U.S. economic reports including the NFIB Small Business Index and the Federal Budget Balance. The major report is Consumer Price Inflation (CPI).

U.S. CPI for May is expected to come in at 0.2%, the same as April’s read. Core CPI is forecast at 0.1%, also matching the previous month’s read.

Gold prices could drop further if the numbers come in stronger than expected. With a June rate hike a lock on Wednesday, higher-than-expected consumer inflation will likely drive up the odds of additional rate hikes later this year.

Lower-than-expected inflation figures should underpin gold prices, but may not be enough to actually change the main trend to up.