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James Hyerczyk
Comex Gold

Gold futures posted a choppy trade last week, but still managed to close higher. The U.S. Dollar and the U.S. Federal Reserve were the primary catalysts behind the two-sided trade.

Last week, December Comex gold settled at $1962.10, up $14.20 or +0.73%.

Gold prices opened the week flat as investors maintained a cautious approach ahead of the Fed’s monetary policy decisions scheduled for Wednesday and as optimism around a potential COVID-19 vaccine lifted appetite for riskier assets. Gold picked up strength throughout the session, supported by a weaker U.S. Dollar, while thoughts about the Fed centered on more stimulus measures and inflation targets. Bullish traders were hoping the Fed would reiterate its dovish monetary policy stance.

Gold futures held steady on Tuesday, following Monday’s sharp rise, as the dollar remained subdued ahead of the Federal Reserve’s monetary policy meeting that was expected to provide more clues stimulus measures and inflation targeting.

On Wednesday, Gold futures hit a two-week high but prices began to retreat as the U.S. Dollar firmed ahead of the Fed decision. Despite the small setback, gold remained just under its two-week high as investors continued to bet that the Fed would release dovish details on its plans to balance interest rates against its inflation target.

Gold prices eased on Thursday as the U.S. Dollar firmed, although doubts over a swift global economic recovery and the Federal Reserve’s pledge to hold interest rates near zero until at least 2023 limited losses for the precious metal. Gains were also being capped by the Fed’s favorable economic recovery picture and its stopping short of offering concrete signals on further stimulus.

Finally, late in the week, gold began to recover from its mid-week losses while en route to a second straight weekly gain after the release of lackluster U.S. employment data and vows by major central banks to roll out further stimulus if required to revive their coronavirus-hit economies.

Weekly Forecast

Gold investors were uninspired by the Federal Open Market Committee’s (FOMC) decision because policymakers were reluctant to add stimulus in view of improving fundamentals. This news may keep a lid on prices, but the market continues to be well-supported because of the Fed’s pledge to keep rates pinned near zero until inflation was on track to “moderately exceed” its 2% inflation target “for some time”.

With the Fed closely monitoring inflation and the labor market, and since it’s not scheduled to meet until November 4 -5, the focus for gold investors will be on the U.S. Dollar and economic data.

This week starts with Fed Chair Jerome Powell speaking on Monday and testifying Tuesday through Thursday, followed by several Fed speakers.

The major report is Wednesday’s Flash Manufacturing PMI but traders will also have the opportunity to react to Thursday’s weekly unemployment claims data and Friday’s Durable Goods reports.

For a look at all of today’s economic events, check out our economic calendar.

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