Yahoo Finance Price of Gold Fundamental Daily Forecast – Traders Will Be Focusing on Fed’s Interest Rate Forecasts
Gold futures retreated to its lowest level since July 14 on Tuesday as investors prepared for a widely expected U.S. interest rate hike on Wednesday. The Federal Open Market Committee’s monetary policy statement will also be closely watched for clues about further hikes from the Federal Reserve. Sellers also responded to a stronger U.S. Dollar which rose in response to a solid report on producer inflation.
February Comex Gold futures settled at $1241.70, down $5.20 or -0.42%.
In economic news, U.S. producer price data showed an increase in wholesale inflation, increasing hopes that price pressures may be rising from sluggish levels. According to the Labor Department, the producer price index for final demand increased 0.4 percent last month. The number met economist expectations.
Core PPI was up 0.3%, beating the 0.2% forecast, but coming in lower than the previous month’s 0.4% read.
In other news, the NFIB Small Business Index came in at 107.5, exceeding the 104.6 forecast and 103.8 previous read. The Federal Budget Balance deficit grew more than expected at -138.5 billion versus a -135.2 billion forecast.
Forecast
Gold prices are trading higher early Wednesday in response to a weaker U.S. Dollar. The catalyst behind the price action is the win by Democrat Doug Jones over Republican Roy Moore. Jones’ victory is seen as a political setback to President Trump. His election cuts the Republican’s Senate majority from 52 to 51 and puts at risk several of Trump’s economic plans.
The Senate election news could underpin gold early in the session, however, later in the day, the emphasis will shift to the Fed’s interest rate decision and monetary policy statement.
The U.S. Federal Reserve has raised its benchmark interest rate two times so far this year and analysts say a third rate hike is almost certain, by 25 basis points to between 1.25 and 1.50 percent, at the conclusion of its two-day meeting at 1900 GMT.
With the rate hike a given, gold traders will be primarily focused on the U.S. central bank’s statement for clues on any further rate increases in 2018. Earlier in the year, the Fed forecast as many as three rate hikes, but concerns over sluggish inflation has led some Fed officials to lower their projections to only two rate hikes.
A cut in the number of rate hikes in 2018 could underpin gold prices later today.
This article was originally posted on FX Empire
