Price of Gold Fundamental Daily Forecast – Mixed Signals from Fed Officials Capping Gains

Gold futures are edging lower on Thursday on low volume, while remaining inside a tight trading range for a fourth session. The price action suggests investor indecision and impending volatility. This is likely being caused by two days of mixed comments from Federal Reserve officials.

Gold traders must be thinking, if the Fed can’t get on the same page about inflation and interest rates, then how can we make an informed decision over which way to play the market?

At 05:07 GMT, August Comex gold futures are trading $1775.40, down $8.00 or -0.45%.

Uncertainty Starts at the Top

This latest phase of uncertainty in the gold market likely started on Monday when hawkish Fed officials such as St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan remarked on the risks of acting too slowly. Then, New York Fed President John Williams said it was too soon to shift policy, and that he expects inflation to ease from about 3% this year to close at 2% in 2022 and 2023.

Then on Tuesday, Federal Reserve Chairman Jerome Powell reiterated in a congressional testimony that inflation pressures would be temporary.

Speaking in front of a House panel, Powell continued to attribute most of the recent jump in inflation to factors closely tied to the economic reopening. He said it was “very, very unlikely” that the U.S. would see a repeat of 1970s-style inflation.

The Fed chair also said factors pushing prices higher should retreat over time and that he expects inflation to fall back toward the central bank’s longer-run goal.

The road to uncertainty continued on Wednesday when two Fed officials said that a period of high inflation in the United States may last longer than anticipated a day after Powell downplayed inflation worries and signaled interest rates would not be hiked too quickly.

Atlanta Fed President Raphael Bostic expects interest rates will need to rise in late 2022 as inflation is well above the Fed’s 2% target.

Daily Forecast

The sideways price action could continue for several more days before the next volatile breakout. Without a clear direction and contradictory comments coming from Fed officials, were looking for the consolidation to continue until the economic data tells us otherwise.

Later on Thursday, investors will get the opportunity to react to the U.S. Final GDP report and weekly unemployment claims. The first one is stale data, but weekly initial claims will offer up data on the strength of the labor market. Other reports include durable goods and the Goods Trade Balance.