Price of Gold Fundamental Daily Forecast – Traders Adjusting to Probable Slow Pace of Fed Rates Hikes

Gold futures are moving higher on Tuesday helped by mixed performances in U.S. Treasurys and the U.S. Dollar. The two-day price action so far this week suggests traders are entering holiday mode with many of the major players moving to the sidelines.

The price action also suggests traders are still trying to gauge the impact of soaring Omicron coronavirus cases on the economy and the extent of the recently announced hawkish U.S. Federal Reserve’s monetary policy on soaring inflation.

At 10:50 GMT, February Comex gold is trading $1797.20, up $2.60 or +0.14%. On Monday, the SPDR Gold Shares ETF settled at $167.09, down $0.71 or -0.42%.

Traders are posting a mixed response to Omicron because they still don’t know if the rapidly spreading coronavirus will slow down the economic recovery. Health officials are still gathering data about the effectiveness of vaccines against Omicron, but it looks as if any damage to the economy will fall well short of what we’ve experienced in the past. Some are even saying Omicron infections will peak in a few weeks after spiking higher during the Christmas/New Year’s holiday.

Gold traders appear to be being guided by the choppy movement in U.S. Treasurys with the main focus on the yield curve. The issue causing this type of movement are concerns over the pace of U.S. interest rate hikes in 2022.

After its last monetary policy statement, the Fed announced a faster tapering of stimulus that would likely end by March. This suggested the first of three predicted rate hikes in 2022 could occur as early as April. However, this is not guaranteed, causing Treasury investors to take notice.

Treasury investors are playing with the yield curve to allow for the possibility of a slower pace of rate hikes, which is helping to breathe some life into gold prices.

Daily Forecast

Gold traders could be taking notice of Goldman Sachs trimming of its quarterly GDP forecast for 2022 in reaction to the problems in Washington with President Biden’s economic plan.

This is very important because if U.S. economic growth is going to be slower, then the Federal Reserve may not have to raise interest rates as quickly in 2022. This will affect Treasurys, the yield curve and could put a floor on gold prices or even provide some lift.

The uncertainty over the impact of Omicron is also an unknown that could affect the pace of the economic recovery and the rate at which the Fed raises rates.