Price of Gold Fundamental Daily Forecast – Strengthens Over $1236.90, Weakens Under $1222.70

Gold is trading lower shortly before the regular session opening on Wednesday. Profit-taking and position-squaring in reaction to a rebound in stocks and a firmer dollar are weighing on prices. Traders are also lightening up on the long side ahead of the release of the Fed minutes at 1800 GMT.

At 0949 GMT, December Comex Gold is trading $1229.90, down $1.00 or -0.07%.

Gold improved on Tuesday, but the market posted an inside move, which typically indicates investor indecision and impending volatility. Traders said the gains were related to short-covering. New longs appeared to be scarce since the rally in the equity markets forced them to re-evaluate their reasons for being long.

If you recall, gold rallied last week primarily on safe-haven buying due to a steep two-day drop in U.S. equity markets. That move may have been fueled by a rapid rise in U.S. Treasury yields. If yields continue to consolidate and stocks continue to recover from last week’s steep sell-off then gold buyers may decide to start booking profits.

In other gold related news, according to CNBC, “holdings of the largest gold-backed ETF, SPDR Gold Trust, rose nearly 2 percent last week. That was its biggest weekly inflow since January, with the fund having registered declines of more than 4 million ounces since hitting a peak in late April. Holdings rose 0.6 percent to 748.76 ounces on Monday.”

Forecast

Demand for risk, economic reports and the Fed minutes should dictate the direction of the gold prices on Wednesday.

Strong U.S. economic data and hawkish Fed minutes should be bullish for Treasury yields which will make the U.S. Dollar a more attractive investment and put pressure on dollar-denominated gold.

U.S. Building Permits are expected to come in at 1.27 million units. This will be up slightly from 1.25 million units. Housing Starts are forecast at 1.22 million units, down from 1.28 million units.

The Fed is scheduled to release the minutes of its September meeting at 1400 GMT. Traders will be looking for more details as to the pacing of the central bank’s future rate hikes. At the meeting, the Fed increased its benchmark rate by 25 basis points, while hinting at a similar move in December. The central bank also said it could increase rates at least three times in 2019 and perhaps once more in 2020.

One thing that traders don’t expect the minutes to reflect is last week’s rapid rise in U.S. Treasury yields and its negative impact on the stock market.