Price of Gold Fundamental Daily Forecast – Price Action Suggests Dovish Outlook from Fed on Wednesday
Gold futures spiked to a nearly a two-week high on Tuesday as the U.S. Dollar weakened and investors turned their focus to a U.S. Federal Reserve monetary policy meeting, seeking details of how it planned to hold down rates while aiming to boost inflation.
At 09:11 GMT, December Comex gold is trading $1974.70, up $11.00 or +0.56%.
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Reaction Suggests Dovish Fed Expectations
Traders now await the U.S. Fed’s two-day policy event which ends on Wednesday, its first such meeting since Chairman Jerome Powell unveiled a policy shift towards greater tolerance of inflation, effectively pledging to keep interest rates low for longer.
In other news, U.S. Treasury Secretary Steven Mnuchin and Powell will testify before the Senate Banking Committee on coronavirus relief, the committee said on Monday.
On the data front, traders will have the opportunity to react to the latest Empire State Manufacturing report and a slew of others including reports on Import Prices, Capacity Utilization and Industrial Production. We don’t expect much of a reaction, if any, unless there is a clear outliner. Otherwise, the focus will remain on the Fed and the start of the two-day meeting.
The main driver of the price action is the weaker U.S. Dollar. The greenback dipped against riskier currencies on Tuesday as hopes for a COVID-19 vaccine and big corporate deals improved investor appetite for riskier assets.
Meanwhile, the Chinese Yuan jumped to a 16-month high as a series of Chinese data points to steady economic recovery in China while the Australian Dollar was bolstered by policy minutes from the country’s central bank which stopped short of signaling a further cut to the cash rate.