Gold Price Fundamental Daily Forecast – Edges Higher After World Bank’s Recession Warning

Gold futures closed higher on Friday after earlier weakness, but it wasn’t enough to prevent another weekly loss. Before today’s modest gain, the market was down over 3% and threatening to post its worst week in over two months.

Early in the session, gold was down for a fourth consecutive session, testing its lowest price since April 2020, as expectations of a hefty interest rate hike from the U.S. Federal Reserve next week boosted the U.S. Dollar.

However, the market turned around later in the session as the dollar weakened and global equites tumbled amid mounting worries about the global economy after World Bank warned of a global recession due to rising interest rates and monetary tightening by central banks.

On Friday, December Comex gold futures settled at $1683.50, up $6.20 or +0.37%. The SPDR Gold Shares ETF (GLD) finished at $155.85, up $0.87 or +0.56%.

World Bank Warns of Recession

The World Bank warned on Thursday the world may be edging toward a global recession as central banks simultaneously raise interest rates to combat persistent inflation.

The three largest economies – the United States, China and the Euro Zone – have been slowing sharply, and even a “moderate hit to the global economy over the next year could tip it into recession”, the bank said in a study.

The World Bank said the global economy was now in its steepest slowdown after a post-recession recovery since 1970, and consumer confidence had already dropped more sharply than in the run-up to previous global recessions.

“Recent tightening of monetary and fiscal policies will likely prove helpful in reducing inflation,” Ayhan Kose, the World Bank’s Acting Vice President for Equitable Growth, Finance, and Institutions said in a statement. “But because they are highly synchronous across countries, they could be mutually compounding in tightening financial conditions and steepening the global growth slowdown.”

“Global growth is slowing sharply, with further slowing likely as more countries fall into recession. My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging market and developing economies,” he said.

Short-Term Outlook

Although the headlines said gold was supported by safe-haven buying on Friday, it’s hard to build a case for anyone taking a long position in gold ahead of the Federal Reserve’s interest rate decision on Friday since the market isn’t even sure if policymakers will raise rates by 75 basis points or 100 basis points.

That being said, Friday’s move was likely fueled by short-covering and position-squaring ahead of the Fed. The 25 basis point spread in rate hike expectations could be the difference between $1700 gold and $1600 bullion.

Look for investors to start dealing with the recession issue after September 21.