Price of Gold Fundamental Weekly Forecast – Counter-Trend Buyers Trying to Build Support Base Ahead of Fed

Gold futures traders are expected to take their cues this week from Treasury market investors and U.S. Federal Reserve policymakers, however, there are some who will argue that the two are not on the same page at this time and quite frankly a little disjointed.

Bond could be volatile in the week ahead. If yields move higher, that could make it difficult for gold futures to gain traction although last Friday’s price action suggested traders may be getting used to the idea of higher interest rates. We should know by the end of the week if that statement was pre-mature.

Last week, April Comex gold settled at $1719.80, up $21.30 or +1.25%.

The bond market in the coming week will likely take its cues from the Federal Reserve, which meets Tuesday and Wednesday. However, there are enough economic reports including U.S. Core Retail Sales and weekly unemployment claims to stir the gold market a little.

According to CNBC analysts, the Fed is expected to give a nod to much better growth. Meanwhile, bond professionals are also watching to see whether Fed officials will tweak their interest rate outlook, which now does not include any rate hikes through 2023.

“The markets have way too high expectations around what the Fed is going to do or say,” said Gregory Peters, head of multi-sector and strategy at PGIM Fixed Income. “I think the message is going to be consistent.”

He said Fed Chairman Jerome Powell is likely to sound dovish and is unlikely to give any time frames on when the central bank will change its bond-buying program or other policy.

Weekly Forecast

Gold traders aren’t expecting much from the Fed at this week’s meeting especially since the latest consumer inflation data released last week was pretty mild. However, this meeting is likely to be the proverbial calm before the storm. The real fireworks will come in June when the Fed will finally have a chance to react to some really strong inflation numbers that the bond market has already to price in.

We could see a technical bounce in gold this week but don’t expect it to turn into a long-term trend. The market probably needs to alleviate some of the downside pressure that has been building. Additionally, gold bears would like to re-short at higher prices.

Aggressive counter-trend traders may want to play for a short-term rally, but trend traders are likely to sit back and wait for gold to reach a favorable higher level before they initiate a round of fresh selling.