Price of Gold Fundamental Daily Forecast – Traders Expressing Caution Ahead of Fed Chair Powell’s Speech

Gold futures are trading steady to lower shortly before the regular session opening on Thursday as investors reassessed their positions, booked profits after a more than 1% jump the previous session and anticipated fresh stimulus announcements from the U.S. Federal Reserve Chairman could spur and economic revival.

At 11:06 GMT, December Comex gold is trading $1945.50, down $7.00 or -0.36%.

Traders also have the opportunity to react to quarterly data on Preliminary GDP, monthly Pending Home Sales and weekly Unemployment Claims.

Fed Chair Powell to Discuss Monetary Policy

Fed Chair Jerome Powell is scheduled to discuss the Fed’s annual conference of central banks at 13:10 GMT, with investors watching for inflation and monetary policy clues.

The Fed has cut interest rates to near zero and introduced unparalleled measures to stimulate the coronavirus-hit economy, contributing to gold’s 28% increase so far this year.

Lower interest rates minimize the opportunity cost of owning non-yielding bullion and weigh on the dollar, rendering gold cheaper for buyers transacting in other currencies.

Gold also benefits as a perceived hedge against possible inflation and currency debasement triggered by the money-printing by global central banks to ease the economic blow from the pandemic.

Economic News

Today’s quarterly Preliminary GDP report is expected to show the U.S. economy contracted by 32.5%. This is only slightly below the previously reported -32.9%.

Weekly Unemployment Claims are expected to show that 1.0 million workers filed for jobless benefits the week-ending August 22. This is down slightly from the previously reported 1.16 million. Despite the expected dip, it’s still a fairly high number.

Pending Home Sales are expected to come in 2.5% higher, a substantial drop from the previously reported 16.6%.

Daily Forecast

All eyes will be on Fed Chair Jerome Powell’s keynote speech on Thursday. He is widely expected to comment on the central bank’s Monetary Policy Framework Review, which likely involves average inflation targeting. The change to inflation targeting could be very beneficial for gold as it would allow the Fed to keep rates lower for longer.

Well Fargo Head of Global Fixed Income strategy Brian Reeling said, “We expect that a more flexible inflation target will keep the federal funds rate ‘lower for longer’ – even if inflation moves to the 2% level, or above it, for a time.

TD Securities said Tuesday that it sees this type of a shift in monetary policy as very good for gold.

Commerzbank noted, “Real interest rates would then slide even further into negative territory if inflation were to rise. This would point to higher gold prices in the coming months and beyond,”

Gold bulls have been waiting for stimulus for weeks. With Congress unable to deliver a stimulus package, the Fed may deliver a much needed shot in arm for a market that is in a position to close lower for the month.

For a look at all of today’s economic events, check out our economic calendar.