Price of Gold Fundamental Daily Forecast – Fed Minutes Didn’t Give Traders the Rate Hike Clarity They Needed

Gold futures are trading flat on Thursday as traders continue to digest the minutes of the Fed’s July meeting that featured hawkish comments about its rate hike plans and remarks about a possible slowdown in rate increases if the economy weakens.

Some traders read the overall minutes as hawkish. Some saw it as dovish. While others thought the minutes were less-hawkish. Today’s early price action suggests traders are assessing the impact of all three possible outcomes. This is leading to a lackluster, low volume trade.

Prices could straddle a short-term 50% level at $1776.20 until they get some clarity from the FedWatch tool, Treasury yields and the U.S. Dollar.

At 08:26 GMT, December Comex gold futures are trading $1777.30, up $0.60 or +0.03%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $164.36, down $1.06 or -0.64%.

What Did the Fed Say to Stop the Selling?

Gold prices were trading lower on Wednesday when the Fed minutes were released, but prices stabilized after traders interpreted the minutes as less-hawkish as expected.

In their July meeting minutes, Fed officials said the pace of future rate hikes would depend on incoming economic data, as well as assessments of how the economy was adapting to the higher rates already approved.

After the release of the minutes, traders of futures tied to the Fed’s policy rate saw a half-percentage-point rate hike as more likely in September.

Daily Forecast

As of 08:36 GMT, the FedWatch Tool shows a 59.5% probability of a 50 basis point rate hike on September 21. This is up from 39.5% ahead of the minutes. The probability of a 75 basis point rate hike dropped from 60.5% to 40.5%.

The shift to a 50 basis point rate hike may be enough to keep gold prices propped up at current levels. Nonetheless, the movement of these numbers could be the source of near-term volatility in the gold market until traders get some clarity about the strength of the economy.

Furthermore, the Fed doesn’t have to make its decision for 34 days. In the meantime, another consumer inflation and non-farm payrolls report will be released. These reports could solidify the size of the next rate hike, giving gold traders something to latch on to with conviction.

Therefore, we’re looking for a two-sided trade over the near-term because the market just doesn’t know for certain what the next rate hike will be.