Price of Gold Fundamental Daily Forecast – Investors Eyeing Powell, US Consumer Inflation Data

The CPI data is going to drive Treasury yields, and yields will drive the U.S. Dollar. And the direction of the dollar will move gold prices. Furthermore, Powell is set to testify for a second day. If he continue to talk about monetary policy issues then we could see some movement in the gold market.
James Hyerczyk
Comex Gold

Gold futures are trading higher on Thursday shortly before the regular session opening, but prices are retreating from its earlier high, which fell well short of a pair of main tops at $1441.00 and $1442.90. On the positive side, buyers followed through to the upside after yesterday’s surge was fueled by dovish comments from U.S. Federal Reserve Chairman Jerome Powell.

At 11:50 GMT, August Comex gold futures are trading $1422.00, up $9.50 or +0.67%.

In delivering his testimony before the House Financial Services Committee on Wednesday, Powell cited three risks that could encourage Fed policymakers to cut its benchmark interest rate in late July. He mentioned business sentiment, a global slowdown in manufacturing, and a persistently low inflation rate.

Following the release of Powell’s prepared remarks, short-dated Treasury rates fell sharply along with the U.S. Dollar. Gold rallied and U.S. equity markets hit record highs. Furthermore, investors solidified their expectations for at least a quarter-point rate cut at the end of this month. The market also began to price a 58% chance of a 50-basis point cut.

Not everyone is on the same page with Powell, who left the possibility of a 50-basis point cut wide open. Of course, President Trump wants rates lower as do financial market investors.

St. Louis Fed President James Bullard, who voted in favor of a rate cut in June, doesn’t see the need for such an aggressive move.

“I would argue for a 25-basis point cut at the next meeting,” Bullard told reporters on Wednesday. “I don’t like to prejudge the meeting too much, but if the meeting were today or tomorrow that is what I would be recommending.”

Additionally, regional Fed presidents in Richmond, Dallas, Philadelphia and Cleveland have all cast doubt on the need to cut interest rates at all.

Daily Forecast

A key measure of U.S. inflation, the core consumer price index will be released on Thursday. It is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.

While the focus was on Powell on Wednesday, St. Louis Federal Reserve Bank President James Bullard highlighted the importance of higher inflation. Bullard repeated his call for an interest rate cut, saying the Fed needs to nudge inflation expectations higher.

In a speech at an OMFIF Foundation meeting at Washington University, Bullard said the Fed should be concerned that inflation remains stubbornly below its 2 percent target.

Bullard also pushed for the Fed to take “insurance” against an economic shortfall. “I think trade uncertainty is going to slow down global growth and that will feed back into the U.S. economy. What we’d like to do is take out some insurance against the possibility of a sharper-than-expected slowdown.”

The CPI data is going to drive Treasury yields, and yields will drive the U.S. Dollar. And the direction of the dollar will move gold prices. Furthermore, Powell is set to testify for a second day. If he continue to talk about monetary policy issues then we could see some movement in the gold market.

Today’s early price action suggests that gold traders are pretty confident of a 25-basis point rate cut, but not so sure of the 50-basis point cut.

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