Price of Gold Fundamental Daily Forecast – Supported by Soft Fed, Bank of England Policy Decisions

Gold futures are trading higher on Thursday because the Federal Reserve didn’t reveal its timetable for its first post-pandemic rate hike or any other subsequent rate hikes in yesterday’s monetary policy statement. Although the Fed did say it would begin tapering its massive stimulus that news was telegraphed weeks in advance.

Ahead of the release of Federal Reserve’s monetary policy statement gold was down sharply as traders anticipated a first rate hike in July 2022 and as many as 2 or 3 additional rate hikes next year. When the Fed remained mute about its first rate hike, shorts covered, leading to today’s strong rally.

At 13:51 GMT, December Comex gold futures are trading $1794.30, up $30.40 or +1.72%.

Dovish Central Bank Surprises Providing Support

Meanwhile, gold is receiving additional support from overseas where the Bank of England defied expectations of a more hawkish policy. This follows Tuesday’s dovish policy statement from the Reserve Bank of Australia.

Gold prices have been underpinned for months because of rising inflation, but capped by the threat of higher interest rates. Now that central bank rate hikes have been kicked down the road, gold buyers will have more freedom to extend the rally at least over the near-term.

Economic Data to Control Price Action

Gold is also going to become more sensitive to economic data especially labor market, growth and inflation reports. On Friday, the U.S. will release its October non-farm payrolls report. I think one of the reasons why the Fed wasn’t confident in announcing a timetable for rate hikes was the uncertainty over labor market growth. Policymakers probably feared that a rate hike would hurt labor market growth.

Furthermore, the Fed still thinks the rise in inflation is “transitory” and mostly tied to supply-chain disruptions. Sure we’re seeing the classic, “too much money chasing too few goods”, but the Fed believes everything will even out once there are more goods available.

The Fed said its tapering would end around June 2022. It also said it could start raising rates after it’s done tapering if necessary. A July 2022 rate hike would put the Fed in line with market expectations.

Daily Forecast

The key number on the chart for long-term gold traders remains $1795.00. Look for this price to continue to act like a pivot.

The Fed bought gold bulls some time to play with the upside a little, but a stronger than expected Non-Farm Payrolls report on Friday could bring the rally to a screeching halt. Ahead of the report, traders are predicting the economy added about 455K new jobs. Anything north of 600K could drive prices lower, while a number below 300K would spike gold prices higher.