Price of Gold Fundamental Daily Forecast – Line in Sand at $1874.00 Separates New Bulls from Lingering Bears

Gold futures are inching higher early Tuesday with the market still hanging around its highest level since June 15 at $1874.00. Interesting price, interesting date.

Well, the price isn’t that interesting. It’s not a major top, but only the high of the day before the release of the Federal Reserve’s monetary policy statement on June 16. Three days after this high was posted, gold was trading at $1765.60, a whopping $108.40 lower.

This information could help explain why the market has been having trouble just under $1874.00. In fact, since surging to $1870.60 on November 10, all buyers have been able to muster is a feeble rally to $1872.60. Perhaps a major short-seller in June is defending his position. This raises the question, is $1874.00 the true breakout price?

At 08:37 GMT, December Comex gold is trading $1867.00, up $0.40 or +0.02%.

June 16 Fed Monetary Policy Statement Revisited

The Federal Reserve on Wednesday, June 16 began closing the door on its pandemic-driven monetary policy as officials projected an accelerated timetable for interest rate increases, opened talks on how to end crisis-era bond-buying, and said the 15-month-old health emergency was no longer a core constraint on U.S. commerce, Reuters reported.

Signaling that broad changes in policy may happen sooner than expected, U.S. central bank officials moved their first projected rate increases from 2024 into 2023, with 13 of 18 policymakers foreseeing a “liftoff” in borrowing costs that year and 11 seeing two quarter-percentage-point rate increases, Reuters added.

Seven of the officials see rates moving higher next year, opening the possibility of even more aggressive action.

Flash Forward to November

The gold chart suggests that from early June to early August, gold traders believed the Fed had inflation under control enough to issue an orderly timetable for its first few post-pandemic rate hikes.

But with gold prices returning to the scene of the crime from June, it looks as if gold traders now feel the Fed is losing control of inflation and may not have a clue about when to begin raising interest rates.

To put it another way, the three month rally in gold indicates the Fed has deviated from the hawkish narrative it spewed in its mid-June policy statement.

Short-Term Outlook

Based on this new assessment, I have to conclude that gold is now sitting just under the line in the sand that separates a rangebound trade from another $50 rally.

This also suggests that traders are waiting for the Fed to deliver something important that could drive prices lower. The longer policymakers keep hesitating on pinning down a time for the first rate hike, the greater the chances for the rally to continue.

The June 14 high at $1874.00 could be the key price that determines the next major move.