Price of Gold Fundamental Daily Forecast – Price Action Suggests Fed News Was Fully-Priced into Market

Gold futures are trading lower early Thursday, remaining inside yesterday’s range and Tuesday’s wide range. This indicates investor indecision and impending volatility. Traders seem to be respecting Tuesday’s technical reversal bottom at $1222.60 and the July 19 main bottom at $1221.00.

At 0749 GMT, December Comex gold futures are trading $1225.70, down $1.90 or -0.15%.

Traders showed almost no response to Wednesday’s U.S. Federal Reserve interest rate decision and monetary policy statement. This is probably because both were widely expected. The Federal Reserve concluded a two-day meeting on monetary policy and left interest rates unchanged. The decision was widely expected, but the central bank upgraded its view on the economy calling it “strong”.

The Fed’s assessment of the economy and its hawkish Federal Reserve statement, raised the chances of a September interest rate hike to 91.4 percent and the probability for another move in December to 68.2 percent.

This news drove U.S. Treasury yields higher while highlighting the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish major central banks, making the U.S. Dollar a more attractive investment. However, this didn’t seem to rattle gold traders, once again supporting the notion that expectations of higher interest rates may already be priced into the market.

Forecast

If gold prices didn’t move much yesterday with the Fed news then I don’t think we’ll see much movement today. U.S. economic reports today include the Challenger Job Cuts, Weekly Unemployment Claims and Factory Orders. None of these reports should be strong enough to move the dollar or gold very much. I also suspect that gold traders will try to keep their powder dry ahead of Friday’s U.S. Non-Farm Payrolls report.

Once again, I want to mention that the money managers and hedge funds are net short gold for the first time since 2016. The latest data incorporates the July 19 bottom at $1221.00. It’s a little too early to tell, but the selling pressure may have exhausted that day, setting up the possibility of a short-covering rally over the near-term. The trend changes to up on a trade through $1244.70, while a move through $1221.00 will signal the resumption of the downtrend.