Price of Gold Fundamental Daily Forecast – Manufacturing PMI Report Will Drive Price Action Today

Gold futures traded higher early Wednesday, but prices retreated after the Fed left rates unchanged, but hinted at rate hikes later this year. At Fed Chair Janet Yellen’s last policy meeting as head of the central bank, the Fed left interest rates unchanged. But its message on inflation signaled it was on track to raise borrowing costs in March under incoming chief Jerome Powell.

April Comex Gold futures settled at $1343.10, up $3.10 or +0.23%.

The U.S. Federal Reserve ended its two-day meeting by announcing it would not raise its benchmark interest rate. However, it indicated that it expects inflation pressures to heat up as the year moves on.

The decision by the Federal Open Market Committee to leave interest rates at 1.25 to 1.50 percent was widely expected. This decision had almost no impact on the markets. However, investors were looking at the statement for clues on how the central bank might proceed for the rest of the year. This was going to be the news that moved the markets.

According to projections released in December, FOMC officials expect three rate hikes this year so long as there is no significant disruption to market conditions. Recent price action in the Treasury markets, however, suggests that investors may believe the Fed is considering a fourth rate hike.

Wednesday’s Fed statement also contained a few tweaks which could influence the market’s view on the timing and the number of future rate hikes.

In other news, the ADP Non-Farm Employment Change report showed the private sector added 234K jobs in December. This was much higher than the 186K forecast. The previous month was lowered to 242K.

Chicago PMI came in at 65.7, beating the 64.2 forecast. Pending Home Sales came in as expected, up 0.5%.

Forecast

The Fed delivered a somewhat hawkish message on Wednesday, but there was very little response from the U.S. Dollar and gold. This may be an indication that investors want to see more proof that the economy is heating up.

Today’s economic reports could help support the Fed’s assessment of the economy. This may cause a little reaction in the market since most investors are probably waiting for Friday’s U.S. Non-Farm Payrolls report before making their move.

On Thursday, investors will get the opportunity to react to a slew of U.S. economic report. Minor reports include Challenger Job Cuts, Preliminary Nonfarm Productivity, Preliminary Unit Labor Costs, Weekly Unemployment Claims, Final Manufacturing PMI, Construction Spending and ISM Manufacturing Prices.

The major report on Thursday is the ISM Manufacturing PMI. It is expected to come in at 58.7, slightly below the previous 59.7.

A stronger-than-expected ISM Manufacturing report should help support the U.S. Dollar, this should put pressure on dollar-denominated gold.

Gold prices could rally if the PMI data is weaker-than-expected.

Gains or losses are likely to be limited ahead of Friday’s jobs reports.