Gold Price Fundamental Daily Forecast – Strong US Economic Momentum Opens Door to Aggressive Fed Rate Hikes

Gold futures are inching higher on Wednesday after erasing an earlier loss. Technically, buyers may have come in at $1701.70 as they continued to defend the psychological $1700.00 level. Fundamentally, a dip in Treasury yields and a pullback from its intraday high by the U.S. Dollar may have encouraged some of the weaker shorts to cover their positions.

Despite today’s early rebound, however, the overall trend is down with the weakness expected to continue due to a strong U.S. economy and expectations of aggressive interest rate hikes by the Federal Reserve. A series of rate hikes by several major central banks are also expected to keep a lid on prices.

At 08:22 GMT, December Comex gold futures are trading $1713.30, up $0.40 or +0.02%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $158.36, down $0.90 or -0.56%.

Better-than-Expected ISM Services Data Indicating Underlying Momentum

On Tuesday, the U.S. reported that the ISM Non-Manufacturing PMI rose more-than-expected in August for a second straight month amid stronger order growth and employment. This report served as a sign of underlying momentum in the economy.

It also gave the Federal Reserve the green light to continue raising interest rates aggressively. At the end of the session on Tuesday, the odds of a super-sized 75-basis-point rate hike was sitting at 74%, up from 56% on Monday.

The news drove up Treasury yields, making the U.S. Dollar a more attractive asset and weighing on demand for dollar-denominated bullion.

Traders Bracing for More US Economic Data, Fed Speakers

Today’s U.S. Trade Balance due to be released at 12:30 GMT and the Fed’s Beige Book, scheduled for 18:00 GMT are the key reports. But it’s Fed Speakers Mester, Brainard and Barr that could have the most impact on gold prices.

Cleveland Federal Reserve President Loretta Mester is hawkish. A week ago, she said she sees benchmark interest rates rising above 4% by early next year. She also said she anticipates the rate increases to slow economic growth, which she sees as running “well below 2%.”