Price of Gold Fundamental Daily Forecast – Position-Squaring Ahead of Fed Decisions, Powell’s Remarks

Higher global equity markets are helping to calm investors on Monday after Friday’s steep sell-off. The move is encouraging traders who bought the U.S. Dollar as a hedge against stock market weakness to pare their positions. The weaker dollar is helping to make gold a more desirable asset. However, gains are likely being capped by rising U.S. Treasury yields.

At 1038 GMT, February Comex gold futures are trading $1243.40, up $2.10 or +0.17%.

The market is also trading inside Friday’s range. This usually indicates investor indecision and impending volatility. However, in this case, it could be a reaction to oversold technical conditions and aggressive position-squaring ahead of the Fed’s interest rate and monetary policy decisions on Wednesday.

In other news, according to the U.S. Commodity Futures Trading Commission (CFTC), hedge funds and money managers switched to net long positions in Comex gold in the week to December 11. This is the first time gold speculators held a net long position since July, and the strongest since June.

Forecast

On Monday, gold traders will have the opportunity to react to several U.S. economic reports, but essentially, all eyes will be on Wednesday’s Fed meeting. The Fed’s interest rate decision, monetary policy statement, and economic projections as well as remarks from Fed Chair Jerome Powell will affect the U.S. Dollar. And the movement in the dollar will set the tone of the gold market.

The Empire State Manufacturing Index is expected to come in at 20.1, down from 23.3. The NAHB Housing Market Index is expected to increase slightly to 61 from 60. TIC Long-Term Purchases is also on tap.

We’re looking for a choppy, two-sided trade today as investors will be primarily positioning themselves ahead of the Fed and not likely to pay attention to other outside factors.