Price of Gold Fundamental Daily Forecast – Higher on Increased Demand from China

Gold futures closed higher on Wednesday as traders responded to the Fed’s decision to leave interest rates unchanged while opening the door to another rate hike in December. Traders also prepared for the announcement of the new Fed Chair on Thursday and Friday’s U.S. Non-Farm Payrolls report.

December Comex Gold futures settled at $1277.30, up $6.80 or +0.54%.

The U.S. Federal Reserve left interest rates unchanged on Wednesday as widely expected while adding Hurricanes Harvey and Irma will not have a much longer-term impact on overall economic activity.

The Federal Open Market Committee, the central bank’s monetary policymaking arm, held its benchmark interest rate target between 1 percent and 1.15 percent. The futures markets also figure the Fed to pass a quarter-point rate hike at the December meeting, although the FOMC did not drop any strong hints in today’s statement.

In other news, the ADP National Employment report showed private-sector businesses added 235,000 jobs last month. Traders expected the report to show private employers added 200,000 jobs in October, up from 135,000 in September.

The ISM manufacturing index hit 58.7 in October. Construction spending was up 0.3 percent in September.

The Institute for Supply Management’s Index registered 58.7 in October, slightly better than the 58.6 forecast. That represented a decline from September’s 59.8, which was the highest reading for the service sector index since August 2005.

The Commerce Department said on Wednesday that construction spending increased 0.3 percent to $1.22 trillion. August’s report was revised down to show a 0.1 percent gain instead of the previously reported 0.5 percent rise. Traders had forecast construction spending unchanged in September.

Forecast

Gold is trading higher during the early session. The market is reacting to lower demand for higher-risk assets, a weaker U.S. Dollar and on increased demand from Chinese retail investors. Additionally, there is increased tension over the announcement of a new chair of the U.S. Federal Reserve, expected later in the day.

U.S. President Donald Trump is expected to nominate Fed Governor Jerome Powell as the next head of the Fed. Traders aren’t worried about Powell, but they are more worried about what his nomination would mean to the frequency of future rate hikes.

As a side note, gold could plunge if Trump surprises the markets by nominating Stanford economist John Taylor.

Traders will also get the opportunity to respond today to comments from FOMC Member Jerome Powell, the Challenger Job Cuts report, weekly unemployment claims, non-farm productivity and preliminary unit labor costs.