Price of Gold Fundamental Daily Forecast – If Powell is Dovish, Are We Looking at Buy the Rumor, Sell the Fact Situation?

Gold prices have been rallying since December 14 or since the last Fed meeting. The move represents investors betting against Powell’s hawkish assessment of the economy. It looks as if investors are expecting Powell to soften his tone about rate hikes, or present a more flexible outlook for Fed policy. If Powell presents a dovish outlook then we could have a buy the rumor, sell the fact situation on our hands which means gold prices will fall on profit-taking.
James Hyerczyk
Comex Gold
Comex Gold

Gold futures are trading lower after hitting the psychological $1300 level earlier in the session. The price action suggests the selling may be greater than the buying at current price levels. Today is also the 13th day up from the last major bottom on December 14, is often the tipping point for rallies due to overbought technical conditions. A lower close today will not indicate a change in trend, but it could lead to a 2 to 3 counter-trend break.

At 1116 GMT, February Comex gold is trading $1293.00, down $1.80 or -0.13%.

Driving the market lower today is increased demand for risky assets. Investors are moving money out of safe-haven assets and into stocks on potentially optimistic news over U.S.-China trade negotiations.

Later today at 1330 GMT, the U.S. will release its Non-Farm Payrolls report. The Non-Farm Employment Change is expected to show the economy added 179K jobs in December, up from 155K. The Unemployment Rate is expected to come in unchanged at 3.7%. Average Hourly Earnings are expected to have risen by 0.3%.

Traders may delay their reactions to the jobs data because at 1515 GMT, U.S. Federal Reserve Chairman Jerome Powell is scheduled to speak. Investors will be listening to hear if he softens his tone on interest rate hikes. Market participants are currently expressing fears that the Fed could bring on a recession with a policy misstep.

A bearish jobs report combined with dovish comments from Powell could drive gold sharply higher. However, there is still the possibility that soft comments from the Fed Chair have already been priced into the market.

Gold prices have been rallying since December 14 or since the last Fed meeting. The move represents investors betting against Powell’s hawkish assessment of the economy. It looks as if investors are expecting Powell to soften his tone about rate hikes, or present a more flexible outlook for Fed policy.

If Powell presents a dovish outlook then we could have a buy the rumor, sell the fact situation on our hands which means gold prices will fall on profit-taking.

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