Price of Gold Fundamental Daily Forecast – Traders Preparing for Heightened Volatility After Fed Announcements

Gold futures are inching higher on low volume shortly before the release of the U.S. Federal Reserve monetary policy decisions at 18:00 GMT, and Fed Chair Jerome Powell’s press conference shortly thereafter. The trade is cautious with investors awaiting any signs of early tapering from the U.S. Federal Reserve meeting. Traders are getting no help from the usual market drivers with Treasury yields and the U.S. Dollar flat at the mid-session.

At 15:39 GMT, August Comex gold is trading $1860.80, up $4.40 or +0.24%.

Treasury Yields Flat Despite Looming Fed Policy Verdict

U.S. Treasury yields are trading flat at the mid-session on Wednesday, even as investors awaited the much-anticipated outcome of the Federal Reserve’s policy meeting in the afternoon.

The yield on the benchmark 10-year Treasury note fell less than a basis point to 1.485%. The yield on the 30-year Treasury bond drifted lower to 2.179%.

Dollar Steady as Traders Await Fed Announcement

The U.S. Dollar was little changed on Wednesday as traders awaited the conclusion of a U.S. Federal Reserve meeting in which investors will be looking for any sign of response from central bank policymakers to the jump in U.S. inflation.

What to Expect from the Federal Reserve

The Fed is widely expected to acknowledge the first conversations among its policymakers about when and how quickly to pare back the massive bond-buying program launched in 2020, but most investors think the Fed will refrain from any hints of starting tapering its stimulus in the near future.

Market participants will be listening to the news conference after the Federal Open Market Committee (FOMC) meeting for any change in tone from Fed Chair Jerome Powell about whether inflation is likely to be temporary or longer-lasting.

Daily Forecast

We expect to see heightened volatility after the Fed announcements and during Powell’s post-announcement press conference. We’re looking for volatility because the bets before the announcements seem to be mixed.

Some traders believe the Fed will say it has begun the tapering discussion, while others believe policymakers will refrain from making any such announcement until the central bank’s annual economic symposium in Jackson Hole in August. They also feel that this will pave the way for an official announcement potentially by December of this year.

It is possible that a hawkish Fed has already been priced into the gold market. Remember Monday’s sell-off? If so then you’ll have to be prepared for a counter-trend rally after the announcements. If gold traders perceive the Fed as more hawkish than expected, then look for gold prices to plunge. Ultimately, it all depends on what Treasury yields and the U.S. Dollar do.