Price of Gold Fundamental Daily Forecast – Upbeat U.S. data, Fed Minutes Pressuring Gold

Gold posted a two-sided reaction to Wednesday’s U.S. economic news and the Fed minutes before closing slightly higher. Early in the session, gold hit a 3 ½ month high before prices retreated. Gold’s rally may have also been limited by increased demand for higher-yielding assets.

February Comex Gold futures settled at $1318.50, up $2.40 or 0.18%.

The market hit $1323.00 early Wednesday, its highest level since September 20 before stronger than expected U.S. economic data encouraged investors to start taking profits and paring positions ahead of the Fed minutes later in the session.

On Wednesday, the U.S. released a slew of economic data in addition to the Fed minutes. ISM Manufacturing PMI came in at 59.7, beating the 58.1 forecast. Construction Spending grew 0.8%, higher than the 0.6% estimate. ISM Manufacturing Prices were 69.0, coming in well above the 64.8 forecast. Total Vehicle Sales were 17.9 million. Traders were looking for 17.5 million.

Traders showed a mixed reaction to the Fed minutes later in the session. The minutes from the Fed’s December 12-13 meeting were seen as more hawkish than anticipated, indicating the central bank is still poised to raise interest rates several times this year.

Additionally, Fed policymakers acknowledged the U.S. labor market’s solid gains and the expansion in economic activity, even as they affirmed policymakers’ worries about persistently low inflation.

That suggested the central bank will continue to pursue a gradual approach in raising rates but could pick up the pace if inflation accelerates.

Forecast

Early Thursday at 0739 GMT, February Comex gold futures are trading $1311.80, down $6.70 or -0.51%.

Traders are reacting to the stronger U.S. dollar which is leading to lower demand for dollar-denominated gold. The dollar is being boosted by the somewhat hawkish Fed minutes which indicated the Fed is likely to stick with its plan for three rate hikes in 2018.

The short-term range for gold is $1238.30 to $1323.00. If sellers start to take control of the market then we could see a near-term break back to at least $1280.70.

On Thursday, investors will get the opportunity to react to another round of economic data. The first three reports are related to the labor market. They include Challenger Job Cuts, ADP Non-Farm Employment Change and Weekly Unemployment Change. Also on tap is Final Services PMI.