Price of Gold Fundamental Daily Forecast – Light Hedge Buying Ahead of Two-Day Fed Meeting

Gold futures are edging higher on Tuesday as traders await today’s U.S. retail sales report as well as the start of the U.S. Federal Reserve’s two-day meeting, which culminates with the Fed’s interest rate and monetary policy decisions on Wednesday.

Investors expect the Fed to keep monetary policy accommodative, while addressing worries over rising inflation and a recent surge in U.S. Treasury yields.

At 11:10 GMT, April Comex gold is trading $1733.00, up $3.80 or +0.22%.

Gold appears to be trying to form a support base despite firm Treasury yields and a stronger U.S. Dollar. The price action suggests investors may be trying to hedge their bets against the Fed’s decisions. They may be hoping for higher inflation due to the massive fiscal stimulus package to overwhelm the spike in bond yields.

There are a lot of opinions floating around about what the Fed is expected to do at this week’s meeting, but the consensus is it will leave rates unchanged and reiterate its stance that interest rates will stay near zero percent until the economy reaches full employment.

Policymakers may address the ongoing concerns over rising inflation and may even say it discussed increasing its asset purchasing program to offset the rising yields, a move that could be supportive for gold prices.

Daily Forecast

As I mentioned on Monday, inflation figures are expected to jump in May, which means if the Fed is going to make a major move, it will be at its June meeting. U.S. consumer inflation figures are expected to rise sharply because the weak performance from last March will be dropped from the 12-month moving average used to calculate the Consumer Price Index.

In addition to the Fed announcements, which aren’t likely to move the needle much in the markets, Fed Chairman Jerome Powell will hold a press briefing after the second meeting on Wednesday afternoon. This could be a market moving event.

Later today, traders will get the opportunity to react to U.S. retail sales data for February at 12:30 GMT, along with import and export prices for that month. Industrial production data for February is then expected out at 13:15 GMT, followed by business inventories data for January at 14:00 GMT. March’s NAHB Housing Market Index is also set to come out at 14:00 GMT.

The reports may not move gold much, but traders will be paying close attention to another round of Treasury auctions later today. Depending on demand, Treasury yields could be affected, which could move gold prices.