Price of Gold Fundamental Daily Forecast – Hedge Funds Reduced Positions Ahead of Fed Announcements

Gold futures are trading slightly higher shortly after the regular session opening. The market is trading inside Friday’s range, while straddling the previous session’s close. The price action indicates investor indecision and impending volatility. Volume and volatility are below average with traders seemingly reluctant to drive the market in either direction ahead of the U.S. Federal Reserve’s monetary policy statement and interest rate decision on Wednesday.

At 12:42 GMT, December Comex gold is trading $1433.20, up $1.00 or +0.06%.

The Fed is widely expected to cut its benchmark interest rate by 25-basis points on Wednesday. This will be no surprise to gold traders since the move has been priced into the market for weeks. Traders are expected to look beyond this month’s rate cut and instead focus on the central bank’s guidance on monetary policy for the rest of the year. Essentially, investors want to know if the Fed plans to cut rates in September and December.

The next major move in gold will be determined by how dovish the Fed comes across in its monetary policy statement and Fed Chair Jerome Powell in his post-meeting press conference.

Gold is likely to come under pressure if Powell says the Fed will “wait and see” about future rate cuts. If he speaks with clarity and conviction about a rate cut in September or December then gold will be underpinned, or may even breakout to the upside if he comes across as extremely dovish.

In other news, traders will also be watching the renewed trade talks between the United States and China although no major announcements are expected.

According to the Commodity Futures Trading Commission, hedge fund and commodity money managers reduced their bullish stance in COMEX gold in the week to July 23. It’s too early to tell if this represents a trend, or just position-squaring ahead of the Fed announcements.

Daily Forecast

There are no major U.S. economic releases on Monday so the market is likely to trade rangebound on low volume. Most major players are expected to be on the sidelines ahead of the Fed announcements on Wednesday.