Price of Gold Fundamental Daily Forecast – Rangebound Ahead of Second Day of Testimony from Powell

Gold futures are trading flat shortly before the regular New York session opening on Wednesday. The early price action suggests the market is being capped by a rebound in the U.S. Dollar. The inside move on the daily chart also indicates investor indecision. Meanwhile, traders are awaiting another day of testimony from Federal Reserve Chair Jerome Powell just a day after his comments nudged prices higher early Tuesday.

At 12:08 GMT, April WTI gold futures are trading $1807.50, up $1.60 or +0.09%.

Yesterday, Powell told the U.S. Senate Banking Committee that monetary policy still needed to be accommodative with economic recovery “uneven and far from complete”. He also mentioned that the increase in yields was due to higher inflation and growth expectations.

The Fed chief said in prepared testimony that “The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved.”

Fed Chairman Powell also pushed back against concerns that the central bank’s economic support increased the risk of spiraling inflation, and insisted that the central bank’s accommodative monetary policy would remain in place for “sometime.”

Finally, Powell also said investors are mostly responding to an anticipated rebound vaccine deployment curbs the pandemic.

Daily Forecast

Essentially, Powell appeared to be trying to sound supportive for economic growth while downplaying the potential impact of higher inflation. This assessment could mean the Fed is willing to allow rates to edge even higher over the near-term, which could create a challenge for gold. The price action in the U.S. Dollar supports this notion with the greenback rallying after Powell delivered his statement. Meanwhile, stock market investors looked at Powell’s comments as dovish, fueling a huge rebound rally.

Early Wednesday, we have the dollar inching higher after earlier weakness. Treasury yields are making a similar move and stocks are failing to follow-through to the upside. This could be an early indication that Powell’s comments had no impact on the trends taking place before his testimony on Tuesday, or investors are waiting for further clarification from Powell later today.