Price of Gold Fundamental Daily Forecast – Traders Taking Profits Ahead of Fed Minutes

Gold futures rallied to their highest level since September 26 on Tuesday, but the rally fell short of the stop at $1321.00. A sustained move over this level would indicate the buying is getting stronger. The weaker dollar was the catalyst behind the rally. Stronger demand for higher-yielding assets may have put a cap on gains.

February Comex Gold futures settled at $1316.10, up $6.80 or +0.52%.

The market is up 13 days from its bottom on December 12 at $1238.30. This puts it at or near oversold territory which could make it ripe for a near-term correction. This could take place on Wednesday if the Fed minutes give the U.S. Dollar a boost.

Forecast

Gold prices retreated early Wednesday after taking out a former top. The price action indicates that the move was likely fueled by short-covering or buy stops rather than aggressive new buying. The catalyst behind the reversal to the downside was a recovery by the U.S. Dollar and aggressive counter-trend selling related to profit-taking and overbought technical indicators.

At 0800 GMT, February Comex Gold is trading $1315.00, down $1.10 or -0.08%. Earlier in the session, the market reached $1323.00, its highest level since September 20.

U.S. economic news will be at the forefront on Wednesday.

At 1500 GMT, investors will get the opportunity to react to the ISM Manufacturing PMI report. It is expected to come in at 58.1, slightly below the previous 58.2. Construction Spending is forecast at 0.6%, down from the previous 1.4%. ISM Manufacturing Prices are forecast at 64.8, down slightly from the previous 65.5. Total Vehicle Sales are expected to come in unchanged at 17.5 million.

The dollar could strengthen if any of these reports come in better than expected. This should encourage further selling in gold.

Gold investors will also get the opportunity to react to the U.S. Federal Reserve minutes of its December FOMC monetary policy meeting, an event where the Fed raised the Federal funds rate by an additional 25 basis points.

Most of the focus will likely be on the FOMC commentary relating to the inflation outlook given the Fed’s underlying consumer inflation (CPI) forecasts were left unchanged at this meeting despite most members factoring in the impact of tax cuts delivered by the Trump administration in late December.

The minutes will be released at 1900 GMT. Hawkish minutes will be supportive for the U.S. Dollar. This should pressure gold. However, look for a possible spike to the upside if the Fed minutes are perceived as dovish.