Price of Gold Fundamental Daily Forecast – Economic Recovery Tarnishing Gold’s Investment Appeal

Gold futures hit their lowest level in a week on Wednesday as U.S. Treasury yields edged higher ahead of the release of the Federal Reserve’s policy statement later in the day. Economic news from Tuesday is also weighing on prices with U.S. consumer confidence jumping to a 14-month high in April, as more businesses reopened.

At 07:16 GMT, June gold futures are trading $1766.90, down $11.90 or -0.67%.

Gold prices fell on Tuesday as U.S. Treasury yields climbed ahead of the start of the Fed’s two-day policy meeting. The yield on the benchmark 10-year Treasury note advanced 4 basis points to 1.61%. The yields on the 30-year Treasury bond rose 5 basis points to 2.29%.

On the data front, home prices in February registered the biggest gain in 15 years, rising 12% year over year and up from 11.2% in January, according to the S&P CoreLogic Case-Shiller Home Price Index.

Meanwhile, the Conference Board’s Consumer Confidence Index jumped to 121.7, up from the previously reported 109.0. The number also beat the 113.1 estimate. The CB said the recent stimulus package has provided significant support for consumer confidence.

Fed Likely to Stay the Course Despite US Economy’s Growing Momentum

The U.S. economy has had a steady run of good news in recent months, with job gains accelerating as businesses reopen and forecasters projecting that 2021 will see the strongest GDP growth in decades.

But the Federal Reserve has shown no sign that there has been enough progress yet to ease the support for the economy that it put in place at the onset of the pandemic, including a promise to keep its key overnight interest rate near zero for years to come and to keep buying $120 billion in government bonds and mortgage-backed securities each month, Reuters wrote.

Daily Forecast

The Federal Open Market Committee (FOMC) will end its two-day meeting on Wednesday. Its policy statement, due to be released at 18:00 GMT, is expected to largely follow the mold established in December, when the Fed said it would not change monetary policy until there had been “substantial further progress” in meeting its maximum employment and 2% inflation goals.

The Fed is expected to be dovish, but gold traders already know that so it will be hard for the FOMC to get “more dovish”. This doesn’t bode well for gold prices in my opinion.

The recent price action in gold suggests some bulls are just “hanging around”, hoping that something bearish for the economy develops that could drive yields sharply lower, while supporting gold prices.

The next major move by the Fed is likely to be bearish for gold, but no one is certain when that will occur. There is some speculation that the Powell may offer a hint at the next move by the Fed with some traders betting that signs of rising inflation expectations could nudge the central bank to abandon it rhetoric that a policy tightening is still a long way off.

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