Price of Gold Fundamental Daily Forecast – Next Move Should Be Fueled by Renewed Trade War Concerns

Gold futures rose on Wednesday in response to a weaker U.S. Dollar. The recovery by the safe-haven asset suggests investors were heavily short going into the release of the U.S. Federal Reserve’s interest rate decision, monetary policy statement and economic projections.

June Comex Gold settled at $1327.30, up $9.70 or +0.74%.

The price action in the U.S. Dollar was the biggest influence on gold prices. Other factors were weaker U.S. equity markets, which drove up demand for the safe haven asset and concerns the U.S. could ignite a trade war with China after President Trump’s expected announcement on Thursday of new sanctions against the country.

To recap the day’s events, the Federal Open Market Committee on Wednesday announced it would raise interest rates 25-basis points or 0.25 percent, its first hike in 2018. Additionally, it upgraded its outlook for the U.S. economy, citing job gains and low unemployment. Although the central bank expects gradual rate hikes over the long-term, its forecast remained at three hikes in 2018.

The dollar’s initial rally failed to gain traction because ahead of the Fed’s announcement, speculators were probably betting on as many as four rate hikes this year. The dollar’s weakness could also be a sign that investors are betting on improving global economic growth and the possibility that other major central banks would scale back their monetary stimulus and raise rates gradually themselves.

Initially, gold investors appeared to have no problem with the Fed’s quarter-point rate hike and forecast for two more rate hikes this year. However, prices began to strengthen as Fed Chair Jerome Powell briefed journalists during a press conference. During the Q and A session, Powell hesitated to acknowledge the Fed’s perceived hawkish tone, suggesting that perhaps investors had misinterpreted the tone of the Fed’s monetary policy statement.

Forecast

Gold is trading higher early Thursday, but there has been no follow-through to the upside. Nonetheless, the bullish price action and shift in momentum to the upside has put gold in a position to breakout to the upside. This is likely to occur when gold crosses to the strong side of a retracement zone at $1339.50 to $1346.60 and takes out the $1347.50 main top.

At 0655 GMT, June Comex Gold futures are trading $1336.10, up $8.80 or +0.66%.

On Thursday, President Donald Trump will announce tariffs on Chinese imports, a White House official said, in a move aimed at curbing theft of U.S. technology. This move could underpin gold prices with a bigger rally expected to come if China announces sanctions of their own.

In other news, traders will get the opportunity to react to weekly unemployment claims, the Home Price Index, Flash Manufacturing PMI, Flash Services PMI and the Conference Board’s Leading Index.

All of the report are considered minor. Most of the price action should be fueled by the market’s reaction to Trump’s announcement of sanctions against China. If it’s already priced into the market then the reaction should be minimal.