Price of Gold Fundamental Daily Forecast – Higher but Gains Limited Ahead of US Consumer Inflation Report

Gold futures are edging higher shortly before the regular session opening on Wednesday, putting the market in a positon to post a fourth consecutive higher close. The market is being supported by a softer U.S. Dollar, and the hopes a U.S. stimulus package will be passed within a timely manner. The latter is bolstering the precious metal’s appeal as an inflation hedge.

At 11:35 GMT, April Comex gold is trading $1841.80, up $4.30 or +0.23%.

Dollar Hits Two-Week Low against Basket of Major Currencies

The dollar wallowed near two-week lows on Wednesday as demand for safer assets ebbed. The greenback was also in a position to post a third day of losses.

Traditionally viewed as a safe-haven, the dollar has sunk against major peers as optimism over monetary and fiscal support, robust corporate earnings and coronavirus vaccines bolstered risk sentiment.

According to Reuters, there has been a tug-of-war among traders over the impact of the dollar on President Joe Biden’s planned $1.9 trillion fiscal stimulus package.

On one hand, it is expected to speed a U.S. recovery relative to other countries, bolstering the currency. But on the other, it is a major driver in a global reflation narrative that should lift riskier assets at the dollar’s expense.

After a strong start to the year for the greenback, the latter view appears to be regaining sway with last week’s U.S. jobs data providing the turning point, according to Westpac analysts.

Treasury Yields Flat Ahead of Fed Chair Speech

Another item factoring into the value of the U.S. Dollar and gold prices are Treasury yields. Lower yields tend to weaken the U.S. Dollar, which can drive up foreign demand for dollar-denominated gold. Higher yields, on the other hand, tend to weaken gold prices because the precious metal doesn’t pay any interest.

U.S. Treasury yields made little movement on Wednesday morning, with Federal Reserve Chairman Jerome Powell expected to make a speech later today at 19:00 GMT.

Demand for Riskier Assets Higher Before Stock Market Opening

U.S. stock index futures are up early Wednesday as the equity markets looked to resume their February rally.

Daily Forecast

Gold is nudging higher on low volume due to the weaker U.S. Dollar. Flat Treasury yields are have little effect on the price action but this could change if there is any movement on the coronavirus relief package. Higher stocks could cap gold’s gains, however.

Gold traders will get the opportunity to react to the latest U.S. consumer price index report at 13:30 GMT. Economists expect a consensus 0.3% increase in the index, or a year-over-year gain of 1.5%, according to Dow Jones. Excluding food and energy, the so-called core consumer price index, is projected to rise by 0.1%.