Price of Gold Fundamental Daily Forecast – Traders Leaning Toward Dovish Fed Message

Gold futures are trading flat on Wednesday despite a weaker U.S. Dollar as investors awaited the outcome of the Federal Reserve’s policy meeting for details of the U.S. central bank’s plans to balance interest rates against its inflation target.

At 09:51 GMT, December Comex gold is trading $1966.80, up $0.60 or +0.03%.

Most of the major gold players are on the sidelines because of uncertainty ahead of the Fed announcements. These traders are waiting for more clarity on what monetary tools the Fed is expected to use to support inflation above 2%. The Fed decision is due at 18:00 GMT, followed by a news conference by Chairman Jerome Powell 30-minutes later.

Last month, the U.S. central bank adopted a more accommodative approach to inflation and pledged to keep interest rates low for longer.

“Markets will want to see if the Fed will modify its language as some expect, perhaps something to the effect that it will keep rates low for a period of time (say three years) or maybe do the same thing with its inflation language,” said Edward Meir, an analyst at ED&F Man Capital Markets, in a note.

“But, we doubt the Fed will lock itself into such a fixed language ahead of a potential turn in the U.S. economy.”

US Economic Data Better Than Expected

The Federal Reserve reported on Tuesday that U.S. industrial production rose 0.4 percent in August – its fourth consecutive monthly increase, but gains have plateaued since June. The Empire State Manufacturing Index, a monthly survey of manufacturers in New York State conducted by New York’s Federal Reserve Bank, confirmed that business activity expanded at a solid clip in September.

Separately, U.S. import prices increased more than expected for the same month, supporting the view that inflation pressures were building up.

On Wednesday, investors get the opportunity to react to a slew of U.S. economic data including Retail Sales, Business Inventories and the NAHB Housing Market Index.

Core Retail Sales are expected to come in at 1.0%, slightly below the previously reported 1.9% and Retail Sales are expected to show a 1.1% jump, lower than last month’s 1.2%.

Daily Forecast

The Federal Reserve is expected to wrap up its latest policy meeting on Wednesday with somewhat rosier economic forecasts but a renewed pledge to keep interest rates low for as long as the world’s biggest economy needs to recover from its deepest downturn in decades.

However, there is still room for surprises on Wednesday, including the chance the Fed will provide more formal guidance on interest rates, or a ramp-up in bond-buying that would signal a more muscular approach to economic stimulus.

Gold could rally if the Fed mentions those two policies since both would be dovish moves.

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