Price of Gold Fundamental Daily Forecast – Price Action Suggests Traders are Expecting Hawkish Minutes

Gold prices fell on Tuesday, trading near a one-week low as the U.S. Dollar recovered from a three-year low hit last Friday. Rising Treasury yields helped make the dollar a more attractive investment. Additionally, investors awaited the minutes of the U.S. Federal Reserve’s January policy meeting for clues on the pace of interest rate hikes this year.

April Comex gold settled at $1331.20, down $25.00 or -1.84%.

In addition to higher yields on bonds which make gold a less attractive investment because it pays no interest, the absence of Chinese buyers from the market put further pressure on the precious metal.

Forecast

Gold investors are likely to key off three factors on Wednesday. Firstly, there is a barrage of U.S. debt being auctioned off this week. Weak demand could weaken the dollar which would be supportive for gold. Secondly, there are geopolitical uncertainties ranging disunity at the recent Munich security conference to threatened U.S. trade sanctions. Thirdly, traders will be eyeing the release of the minutes of the U.S. Federal Reserve’s January 30 to 31 policy meeting.

At 0804 GMT, April Comex gold is trading $1328.30, down $3.00 or -0.23%.

The Fed minutes, due to be released at 1900 GMT, are likely to exert the most influence on gold prices today. The minutes could have more impact than usual if they provide any insight on inflation and interest rates.

A hawkish Fed is likely to have a negative influence on gold prices. A dovish Fed will likely fuel a short-covering rally.

Any move is likely to be limited after the release of the Fed minutes because of next week’s testimony by new Fed Chair Jerome Powell. The minutes may lay the groundwork for the next major move, but Powell may be the one that actually triggers the move.

In other news, investors will get the opportunity to react to the latest data on Flash Manufacturing PMI, Flash Services PMI and Existing Home Sales. Gold prices could be pressured if strong reports support multiple rate hikes by the Fed later this year.