Price of Gold Fundamental Daily Forecast – North Korean Worries Could Offset Hawkish Fed Minutes

Gold prices are inching higher early Wednesday in response to a weaker U.S. Dollar and renewed tensions over North Korea after the rogue nation launched another missile over the week-end. Gains are being capped ahead of the release of the U.S. Federal Reserve meeting minutes.

At 0544 GMT, August Comex gold is trading $1224.70, up $1.70 or +0.15%.

Essentially, safe-haven buying in the wake of the latest missile test in North Korea is underpinning the market while investors remain cautious ahead of the impending release of the FOMC minutes, which could give investors some clarity as to the timing of the next Fed rate hike.

Asian investors are primarily behind the support early today. They’re more than happy to drive up bids due to North Korean tensions. When U.S. investors return later today after the one-day holiday, we could see a different reaction.

The action by North Korea triggered a call by Washington for global action to hold the country accountable for pursuing nuclear weapons. An aggressive response by the U.S. could drive gold prices higher since money is likely to pour into the safe haven asset.

Traders are also saying today’s early strength may be related to oversold technical conditions and value-based buying since gold is trading in the neighborhood of the psychological $1200 level.

Later today at 1800 GMT, investors will get the opportunity to react to the minutes of the Fed’s June meeting. Traders want to know how committed the central bank is to raising rates before the end of the year. The minutes may also reveal details on the Fed’s plan to trim its massive balance sheet.

Traders are expecting to hear hawkish talk from the Fed so this may cap the gains in the gold market and may even drive the market lower. It all depends on how much has already been baked into the market and how much weight the North Korean situation is carrying.

In other news, U.S. Factory Orders are expected to come in 0.5% lower. The IBD/TIPP Economic Optimism report is expected to come in at 51.6, up slightly from 51.3.

Look for a bearish tone today if investors downplay North Korea and the Fed is more hawkish than expected. Gold prices could firm if the North Korean situation escalates and the Fed’s tone is less-hawkish than expected.