Price of Gold Fundamental Daily Forecast – Political Turmoil, Fed Minutes Continue to Be Supportive

Gold futures are trading higher early Thursday as investors continue to respond to yesterday’s rebound in the market that was fueled by a sudden drop in U.S. Treasury yields, a weaker U.S. Dollar and lower demand for higher-risk assets.

At 0630 GMT, December Comex Gold futures are trading at $1293.50, up $10.60 or +0.83%.

The catalysts behind yesterday’s reversal from early session weakness were President Trump’s decision to disband a panel of industry experts on his advisory councils and mixed U.S. Federal Reserve monetary policy meeting minutes.

Trump’s move inspired investors to shed the U.S. Dollar because they may have lost confidence in his ability to run the government. The minutes of the Fed meeting produced mixed results which suggest the Federal Open Market Committee may not have the votes to raise rates later this year.

The minutes showed a fissure between FOMC members who wanted to stay the course and continue to raise rates and those members who preferred the Fed slow down the tightening process.

The more dovish meeting participants expressed “concern about the recent decline in inflation” and said the Fed “could afford to be patient under current circumstances.”  The “argued against additional adjustments” until the central bank was sure that inflation was on track.

The more hawkish FOMC members “worried about risks arising from a labor market that had already reached full employment and was projected to tighten further.” They also argued that delaying a steady dose of rate hikes could cause the Fed to overshoot its employment target and cause financial instability.

Forecast

The early price action indicates that investors are still reacting to Wednesday’s bullish events. The upside momentum created by the events has put gold in a position to take out the high reached earlier in the week at $1298.10. This would put the market in a position to challenge $1305.50 to $1307.00.

The market is in an uptrend that is likely to hold unless sellers return and take the market through $1272.70.

Traders have a series of reports today to digest but I don’t see anything that could sway the thought that the central bank will remain split on whether to raise rates before the end of the year. These reports include Weekly Unemployment Claims, the Philly Fed Manufacturing Index, Capacity Utilization, Industrial Production and the Conference Board’s Leading Index.

The market moving event today may be a speech by FOMC Member Robert Kaplan. Earlier in the week, he said he would “like to see more evidence that [the central bank is] making progress on our 2% inflation objective.” According to the FOMC Hawk/Dove Scorecard, Kaplan has been slightly hawkish. His comments are likely to cause volatility in the markets when he speaks at 1630 GMT.