Price of Gold Fundamental Daily Forecast – Powell’s ‘Hawkish’ Remarks Wipe Out Early Gains

Gold futures are trading lower at the mid-session on Tuesday after giving back earlier gains after seemingly hawkish comments from U.S. Federal Reserve chairman Jerome Powell sent buyers heading to the exits.

Shortly after the opening, the market jumped over 1% in reaction to concerns over the Omicron coronavirus variant. Those gains were wiped out by Fed Chair Powell’s remarks.

At 18:53 GMT, February Comex gold futures are trading $1778.00, down $7.20 or -0.40%.

Powell Puts Faster Bond-Buying Taper on Fed’s Christmas Table

The U.S. central bank should consider accelerating the winding down of its large-scale bond purchases at its next policy meeting in two weeks amid a strong economy and expectations that a surge in inflation will persist into the middle of next year, Federal Reserve Chair Jerome Powell said on Tuesday, Reuters reported.

Powell twinned his remarks, described by some analysts as “surprisingly hawkish,” with a characterization of the economic risk from an emergent variant of COVID-19 that has unnerved officials and financial markets worldwide in recent days as not comparable to the spring of 2020 when the pandemic erupted.

“At this point the economy is very strong and inflationary pressures are high and it is therefore appropriate, in my view, to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner, and I expect that we will discuss that at our upcoming meeting in a couple of weeks,” Powell, who testified alongside Treasury Secretary Janet Yellen, told the Senate panel.

Despite Powell’s Remarks, Omicron Still the Main Story

Gold prices climbed higher early Tuesday after Treasury yields and the U.S. Dollar dropped following a warning from Moderna’s CEO about the effectiveness of the current COVID-19 vaccines.

The price surge came after Moderna CEO Stephane Bancel told the Financial Times that he expects existing vaccines to be less effective against the new variant. The CEO told the paper there could be a “material” drop in the current vaccines’ effectiveness against this variant. Bancel told CNBC on Monday that it could take months to develop and ship an omicron-specific vaccine.

Short-Term Outlook

Treasury yields rose from earlier lows and the U.S. Dollar moved slightly higher off its low of the session after the Powell remarks. These moves hardly represent a hawkish response. However, until gold traders receive more details about the Omicron variant, it’s going to be hard to justify a major move in either direction.

The Fed meets in a little more than two weeks. Scientists are expected to release more data on the variant. In the meantime, the Omicron is likely to continue spreading around the world. A lot can happen in two weeks that can sway Powell to move the other way on tapering.

Additionally, Powell said the Fed would discuss speeding up tapering. This story has been in the news for weeks. Until the meets in mid-December, it’s pretty risking betting on the direction of gold prices.

I’m looking for a rangebound trade with prices straddling $1781.00 to $1757.10 over the near-term.