Gold Price Forecast XAU/USD – Pressured by Rate Hike Fears Ahead of US GDP Data

Gold futures are edging lower on Thursday, but the market is being supported by a dip in Treasury yields and a slightly weaker U.S. Dollar. The price action seems to suggest that traders are still assessing the impact of the Fed minutes while dealing with the fact that interest rates are going to stay higher for longer than previously anticipated, which should keep a lid on prices.

At 08:28 GMT, April Comex gold futures are trading $1835.30, down $6.20 or -0.34%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $169.65, down $0.97 or -0.57%.

Fed Minutes Recap

The Fed minutes released on Wednesday were essentially stale data. They did state that policymakers agreed rates would need to move higher, but that the shift to smaller-sized hikes would let them calibrate more closely with incoming data.

Essentially this means that the Fed is still looking to fight inflation by raising interest rates, just not as aggressive as before. Hence, the 25-basis point hike on Feb. 1 and the similar rate hikes being priced in for March, May and June.

But since the Feb. 1 interest rate decision, economic conditions have changed considerably. Inflation is still too high. The jobs market is still too tight. Consumers are still spending and the services industry is strong.

The economy is so hot that investors now expect rates to peak at 5.362% in July and remain above 5% through the year. The day before the last Fed rate hike on Feb. 1, the terminal rate was 4.88%.

It’s the rapid rise from 4.88% to 5.362% that has spooked gold investors into selling.

Short-Term Outlook

On Thursday, gold investors will get the opportunity to react to U.S. economic data on GDP, GDP Prices and weekly unemployment claims.

The GDP data is expected to show growth of about 2.9%, which will give the Fed room to raise rates slowly without triggering a recession.

The weekly jobless claims data is expected to show 200K workers filed for unemployment claims. This is up slightly from the previous week but still an indication of a tight labor market. This also supports the Fed’s case for higher rates.

The GDP Price Index is also an inflation indicator. It is expected to come in at 3.5%, matching the previous month. The Fed would like to see a lower than expected reading. Matching or exceeding the estimate would also support the Fed’s case for higher rates.

Based on the estimates, there is nothing in the reports that could shake up the gold market. If the data were to come in hotter than expected then sellers could pressure prices. Cooler than expected readings could fuel an intraday short-covering rally.

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