Price of Gold Fundamental Daily Forecast – PCE Price Index, Powell Testimony Should Create Volatile Trading Environment

Gold prices traded steadily on Wednesday, with pressure from a stronger U.S. Dollar being offset by safe haven buying due to the late session sell-off in U.S. equity markets. A slight dip in U.S. Treasury yields may have also provided some support.

April Comex Gold futures settled at $1317.90, down $0.70 or -0.05%.

The gold market started to weaken earlier in the week after a rise in U.S. bond yields drove the U.S. Dollar to a five-week high, following hawkish comments from Federal Reserve Chair Jerome Powell that laid out a case where the Fed could raise rates more than it has forecasts.

“At the December meeting the median participant called for three rate increases in 2108,” Powell said Tuesday in response to a question during his testimony to the House Financial Services Committee. “Since then, what we’ve seen is incoming data that suggests a strengthening in the economy and continuing strength in the labor market. We’ve seen some data that in my case will add some confidence to my view that inflation is moving up to target. We’ve also seen continued strength around the globe. And we’ve seen fiscal policy become more stimulative.”

But he emphasized this does not mean the forecast will be upgraded. “So I think each of us is going to be taking the developments since the December meeting into account and writing down our new rate paths as we go into the March meeting, and I wouldn’t want to prejudge that,” he said, in comments before the House Financial Services Committee.

In other news, a report on quarterly Preliminary Gross Domestic Product came in as expected at 2.5%, slightly below the previously reported 2.6%.

The Chicago PMI was lower than expected at 61.9. The forecast was for 64.2, slightly below the previous 65.7.

Pending Home Sales were a disappointing -4.7%. Last month’s report was revised lower to 0.0%. Traders were looking for a 0.4% increase. Most traders blamed rising mortgage rates for the decline.

Forecast

Renewed selling pressure is helping to drive gold prices lower early Thursday. Most of the selling is coming from Asia. Prices are being weighed down by a stronger U.S. Dollar while investors awaited the second session of Federal Reserve Chair Powell’s testimony before the Senate Banking Committee later in the day.

At 0832 GMT, April Comex Gold is trading $1313.40, down $4.40 or -0.33%.

Taking out $1309.00 will reaffirm the downtrend. This could drive prices into a major retracement zone at $1306.60 to $1291.50. Traders will be forced to make a decision on a test of this zone:  Either buy value or succumb to the strengthening U.S. Dollar.

If Powell reiterates his commitment to more rate hikes than previously expected then prices could plunge into this retracement zone.

In other news, gold prices will also be driven by several U.S. economic reports including the Core PCE Price Index which is the Fed’s favorite inflation indicator, Personal Spending and Personal Income.

Traders will also get the opportunity to react to the Weekly Unemployment Claims report, and Construction Spending.

Finally, data will be released on Final Manufacturing PMI, ISM Manufacturing PMI and ISM Manufacturing Prices.

Look for volatility today with the release of the Core PCE Price Index at 1330 GMT. It is expected to show an increase of 0.3%, up from the previously reported 0.2%. Powell will begin his testimony at 1500 GMT.