Price of Gold Fundamental Daily Forecast – Rangebound Until Comey Testimony Next Week

Gold is trading steady to better on Thursday as investors continue to react to the impact of the less-than-hawkish Fed Meeting Minutes released late Wednesday.

Yesterday, August Comex Gold futures settled at $1256.50, down $2.40 or -0.19%. Despite the lower close, the market did erase most of its earlier losses.

Gold rallied after the U.S. Dollar reversed to the downside after the Fed minutes showed policymakers agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, although most members said a hike was coming soon.

Despite the market’s reaction to the minutes, most traders still believe the Fed will raise rates in June unless the next U.S. Non-Farm Payrolls or inflation reports grossly disappoint. This is probably why gold’s reaction to the news has been limited on the upside.

Going into the release of the minutes, Federal funds futures implied a 79 percent chance the Fed would raise rates by a quarter point at its June 13 -14 meeting, according to the CME Group’s FedWatch program. After the minutes were released, the indicator jumped to 83 percent.

Forecast

In my opinion, I think the rate hike has been priced into gold. This may be limiting the upside. However, helping to underpin gold are concerns over the Trump administration’s ability to implement his economic agenda.

I don’t think that traders were too receptive to the reasons why the Fed didn’t raise rates in May. After all, they told us in their policy statement that they were worried about the slow first quarter economy and that conditions would improve.

Gold may continue to react positively to the weaker U.S. Dollar, but I don’t expect too much of a rally as long as stocks continue to hover around or post new all-time highs.

Trading conditions may change to the bullish side of the equation next week, when former FBI Director James Comey gives his testimony before the Senate Intelligence Committee.

Last week’s technical reversal top at $1268.30 has temporarily stopped the rally, but it hasn’t really brought in the sellers. The current price action actually suggests investor indecision and impending volatility.

The price action suggests that investors may be willing to wait until Comey’s testimony before making their next major move in the market.