Price of Gold Fundamental Daily Forecast – Watch for Reaction to Core PCE Price Index Report

Gold prices plunged on Wednesday, driven by a strong recovery in the U.S. Dollar. The sell-off in gold drove the safe haven asset to a one-week low while posting its biggest one-day decline in nearly nine months.

June Comex Gold futures settled at $1329.10, down $18.80 or -1.39%.

Despite the volatility in the stock market and the drop in U.S. Treasury yields, gold’s appeal as a safe haven asset dropped on Wednesday. Concerns about the global trade war also eased after the Trump Administration said the President’s tariffs on Chinese goods may not be imposed until early June.

Additionally, the lack of interest in gold was driven by hopes of détente in East Asia. According to reports, North Korea’s leader Kim Jong Un pledged his commitment to denuclearization and to meet U.S. officials, China said on Wednesday after his meeting with President Xi Jinping, who promised China would uphold friendship with its isolated neighbor.

The U.S. Dollar rose against a basket of major currencies on Wednesday. The catalysts behind the rally were a combination of end-of-the-month and end-of-the-quarter position-squaring, a stronger-than-expected US. Q4 GDP report, the easing of geopolitical tensions in Southeast Asia and hawkish comments from a high-ranking U.S. Federal Reserve official.

In other news, U.S. GDP came in at 2.9%, up from the previously reported 2.5% and better than the 2.7% estimate. Pending Home Sales rose 3.1%, beating the 2.1% estimate and a marked improvement from the previously reported 5.0% decline.

The Fed’s Raphael Bostic said on Wednesday that the central bank should continue to raise interest rates back to the long-term neutral rate given how close the central bank is to its goals.

Forecast

Gold prices are trading slightly lower in limited action early Thursday. The lack of fresh news overnight and a relatively flat-to-higher U.S. Dollar and stock market is contributing to the muted price action.

At 0731 GMT, June Comex Gold is trading $1329.70, down $0.20 or -0.02%.

We’re going to be watching the volume today because of the long Easter holiday weekend. Below average volume can lead to a tight trading range, but thin trading conditions have been known to fuel volatile reactions.

U.S. economic news will be at the forefront today. The Core PCE Price Index, the Fed’s favorite inflation indicator, is expected to come in at 0.2%, down slightly from 0.3%.

Personal Spending is expected to rise 0.2%, in line with last month’s reading. Personal Income is also expected to come in the same as last month’s read at 0.4%.

Weekly Unemployment Claims are expected to come in at 230K. Chicago PMI is forecast to rise slightly to 62.1. Finally, Revised University of Michigan Consumer Sentiment is expected to come in at 101.9, slightly below the previously reported 102.0.

The direction of the market today is likely to be dictated by trader reaction to $1331.60. Look for a bullish tone to develop on a sustained move over this level. A downside bias will develop on a move under this level.