Price of Gold Fundamental Daily Forecast – Increasing Chance of June Rate Hike Pressuring Prices

Gold futures are trading lower early Thursday as concerns over rising U.S. interest rates offset geopolitical worries.

At 0838 GMT, June Comex Gold futures are trading $1352.40, down $7.60 or -0.56%.

On Wednesday, gold prices spiked upward to their highest level since January 25, boosted by escalating tensions in Syria, U.S. sanctions on Russia and the U.S.-China trade spat

The rally was primarily driven by comments from President Trump who warned Russia to prepare for a strike on its ally, Syria. His warning came in response to the Russian ambassador to Lebanon who said earlier his country would intercept any U.S. attack on Syria and potentially target the craft that fired missiles.

Trump tweeted a warning to Russia of an imminent military action in Syria over a suspected poison gas attack, declaring that missiles “will be coming” and lambasting Moscow for standing by Syrian President Bashar al-Assad.

In other news, U.S. consumer prices fell for the first time in 10 months in March, weighed down by a decline in the cost of gasoline, but underlying inflation continued to firm amid rising prices for healthcare and rental accommodation.

The U.S. Consumer Price Index (CPI) fell 0.1% versus expectations of 0.0%. It was also down from the previously reported 0.2%. Core CPI remained steady, posting a 0.2% gain.

Forecast

The direction of the gold market the rest of the session on Thursday is likely to be driven by the events over Syria and rising expectations for a faster pace of U.S. rate hikes.

Prices will rise sharply higher if a missile response from the U.S. brings it into a direct conflict with Russia.

Prices are likely to retreat further if investors keep their focus on rising interest rates.

Expectations of a Fed rate hike in June increased late Wednesday with the release of the latest minutes from the Federal Open Market Committee’s meeting on March 20-21.

Surprisingly, all of the Federal Reserve’s policymakers felt that the U.S. economy would firm further and that inflation would rise in the coming months. This was enough to drive up investor expectations for another quarter-point rate hike in June.