Price of Gold Fundamental Daily Forecast – Uncertainty Over Rate Cut Encouraging Light Profit-Taking

Gold prices are trading lower on Wednesday shortly after the regular session opening. Pressuring prices are firmer Treasury yields and a stronger U.S. Dollar. The catalysts behind the first weak session in more than a week are somewhat hawkish comments from Federal Reserve Chairman Jerome Powell on Tuesday. Also capping prices today is a better-than-expected Core Durable Goods report.

At 13:00 GMT, August Comex gold is trading $1411.80, down $6.90 or -0.48%.

A jump in demand for higher risk assets is also weighing on gold prices. Stock prices reversed early weakness after Treasury Secretary Steven Mnuchin told CNBC that the U.S. and China were close to reaching a trade deal.

“We were about 90% of the way there (with a deal) and I think there’s a path to complete this,” Mnuchin told CNBC’s Hadley Gamble on Wednesday, without providing details on what the final 10% of an agreement might entail..

Mnuchin’s comments come just days before US President Trump is scheduled to meet with Chinese President Xi Jinping at the G-20 summit in Osaka, Japan.

Comments from Fed Chair Powell and St. Louis Fed President James Bullard on Tuesday fueled a turnaround in yields and the dollar while pressuring demand for gold. Both dampened hopes that the central bank would aggressively cut rates at its next meeting on July 31.

Powell reiterated the comments he made after last week’s policy meeting, saying that while there is greater uncertainty about trade and worries about the global economy, Fed policymakers don’t know how long this may last or how serious the drag might be.

“The question my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation,” Powell said in brief remarks ahead of a moderated discussion at the Council on Foreign Relations in New York.

Bullard repeated that he thought a quarter-point cut would be a wise “insurance” move, but said he didn’t see the need for a half-point cut.

“I think 50 basis points would be overdone,” Bullard said.

Daily Forecast

Powell and Bullard took the wind of the sail of the gold bulls by creating uncertainty. Until the market puts back the “certainty”, so to speak, gold could drift sideways-to-lower. This shifts the emphasis to this weekend’s meeting between Trump and Xi, and next week’s U.S. Non-Farm Payrolls report.