Price of Gold Fundamental Daily Forecast – Outlook for Steady Fed Keeping Lid on Prices

Gold futures are trading sharply lower shortly before the cash market opening on Thursday, pressured by rising U.S. Treasury yields and a rebound in the U.S. Dollar. Increased demand for risky assets is also weighing on prices. Traders are saying an easing of tensions over Brexit is the catalyst behind the selling pressure, followed closely by expectations the U.S. Federal Reserve will continue to hold interest rates at current levels.

At 10:19 GMT, April Comex gold is trading $1298.00, down $11.30 or -0.86%.

Safe-haven demand for gold was dampened late Wednesday after British lawmakers rejected leaving the European Union without a deal. British Members of Parliament (MPs) are now widely expected to vote, later in the day, to delay Britain’s departure from the European Union, currently scheduled for March 29.

Soft U.S. economic data is also playing a role in today’s weakness. On Wednesday, the government reported that U.S. producer prices barely rose last month, resulting in the smallest annual increase in more than 1-1/2 years, reinforcing views the U.S. Federal Reserve would be patient on future rate hikes. This assessment was further confirmed earlier in the week with the release of mixed U.S. consumer data.

Overall, however, gold is likely to remain underpinned by the outlook for a slowing global economy that is expected to continue to push the major central banks toward the dovish side, and may even encourage a few to slash their benchmark interest rates. However, unless the Fed shifts gears to more dovish, gold’s gains are likely to be limited. Earlier today, data from China reaffirmed this assessment. Industrial output grew 5.3 percent in the first two months of this year, the slowest pace of expansion in 17 years.

Daily Forecast

Demand for risk could continue to increase on Thursday if the positive developments continue over Brexit. The next step for lawmakers will be to seek an extension to Article 50, which oversees the withdrawal process from the EU, and thus extends the departure date beyond the March 29 deadline. Members will vote on this issue on Thursday evening.

After hearing arguments from U.K. politicians on why they are requesting the delay, European Union officials could accept or reject this proposal. This decision should also be another source of heightened volatility for gold traders.

In other news, investors will get the opportunity to react to the latest U.S. data on Import Prices, Weekly Unemployment Claims and New Home Sales.

Early Friday, the Bank of Japan is widely expected to leave its benchmark interest rate unchanged. Reuters is also reporting that it is considering a slight downgrade to its assessment of the economy in its monthly report for March as exports and factory output fell due to slowing demand from China.

A dovish Bank of Japan on Friday could drive the USD/JPY higher which could put further pressure on gold prices.