Price of Gold Fundamental Daily Forecast – Pressured by Renewed Expectations of Aggressive Fed Moves

Gold futures are trading at a two-week low early Wednesday, pressured by rising U.S. Treasury yields and a stronger U.S. Dollar.

Gains in benchmark U.S. 10-year Treasury yields reduce the appeal of zero-yield gold, while a stronger dollar makes bullion more expensive for buyers holding other currencies.

At 07:34 GMT, August Comex gold futures are trading $1836.10, down $12.3 or -0.67%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $171.15, down $1.70 or -0.98%.

Tuesday Recap – Hawkish Fed Outlook Weighs on Prices

Prices were down sharply on Tuesday, solidifying the market’s second straight month of declines, as a rise in the dollar and U.S. Treasury yields dented the metal’s appeal despite concerns over surging inflation.

Yields jumped after U.S. Federal Reserve Governor Christopher Waller on Monday advocated for the central bank to raise interest rates at every meeting until inflation is curbed, winding back expectations of a pause in hikes after June and July.

Later in the day, U.S. President Joe Biden met with Fed Chair Jerome Powell to discuss the historic inflation and the U.S. and global economies.

After the meeting, Biden basically said he won’t interfere with the Fed and that both agreed that inflation was their top priority. U.S. Treasury Secretary Janet Yellen also attracted trader attention when she said she was wrong in the past about the path inflation would take. She went on to say, “We can’t rule out further (inflationary) shocks.”

Daily Forecast

Biden and Yellen may have fanned the inflation flames, but they also increased the chances of a more aggressive Federal Reserve.

It was just last week that investors were downplaying the Fed’s needs for aggressive rate hikes after two 50 basis point increases in June and July, but that tune has changed this week. Traders are selling bonds and driving up the U.S. Dollar, and as a consequence, gold prices are being capped.

As long as yields are rising along with the dollar, gold is going to have a hard time rallying. However, if the Fed were to go too far and damage economic growth and the labor market then we could see a short-covering rally in gold. Until then, the market is likely to remain in “Sell the Rally” mode.