Price of Gold Fundamental Daily Forecast – Underpinned by Weaker Dollar, Dropping Treasury Yields

Gold futures are trading higher and in a position to challenge a one-week high on Thursday. The catalysts behind the strength are falling Treasury yields and a weaker U.S. Dollar. Helping to limit gains are increased demand for higher risk assets. Investors are continuing to respond to yesterday’s dovish message from Fed Chair Jerome Powell and expectations of a reduction in the number of rate hikes in 2019.

At 1409 GMT, February Comex Gold is trading $1231.60, up $1.80 or +0.15%.

Powell essentially said U.S. interest rates are close to where the Fed wants them to be – neither braking nor boosting the U.S. economy. This likely means the central bank will limit the number of rate hikes next year, which is a negative for Treasury yields and the U.S. Dollar, but a positive for gold prices.

Forecast

Investors are focusing today on the slew of U.S. economic reports that could have an impact on the direction of interest rates. However, the most important piece of news today may come from the U.S. Federal Reserve meeting minutes. Once this is out of the way, investors are likely to shift their focus to this week-end’s G20 summit meeting in Argentina, where U.S. President Donald Trump and his Chinese counterpart, Xi Jinping are scheduled to discuss trade matters.

Earlier today, the U.S. reported an unexpected dip in the Core PCE Price Index. It came in at 0.1%. Traders were looking for a reading of 0.2%. However, this news may have been offset by a higher-than-expected increase in Personal Spending. It came in at 0.6%. Traders were looking for an increase of 0.4%. Last month’s report was revised lower to 0.2%. Personal Income also beat the estimate, coming in at 0.5%. Traders were looking for an increase of 0.4%.

Weekly Unemployment Claims jumped again to 234K. This was higher than the 221K estimate and the previous week’s 224K reading.

Traders are now waiting for data on Pending Home Sales.

At 1700 GMT, the Fed is scheduled to release minutes from its early November meeting at which it stood pat on interest rates, but signaled a December rate hike. Investors are hoping the minutes shed more light on Fed policy and future rate hikes. However, given Powell’s dovish speech on Wednesday, the minutes may offer nothing new since it is considered stale data.