Price of Gold Fundamental Daily Forecast – Liquidation Could Extend into $1709.10 – $1694.50 Support Zone

Gold futures are trading at a three-week low on Monday as the U.S. Dollar continued its climb amid rising expectations of aggressive rate hikes by the U.S. Federal Reserve. Trader expectations for a super-sized 75-basis-point rate hike jumped to 54.5%, overtaking a 50 basis-point rate hike, which now stands at 45.5%.

At 14:17 GMT, December Comex gold futures are trading $1752.50, down $10.40 or -0.59%. This is up from an intraday low of $1740.20. The SPDR Gold Shares ETF (GLD) is at $162.02, down $0.70 or -0.43%.

Increasing Likelihood of Aggressive Monetary Tightening

Early last week, four Fed officials called for further aggressive monetary tightening including St. Louis Fed President James Bullard, San Francisco Fed President Mary Daly, Kansas City Fed President Esther George and Minneapolis Neel Kashkari.

Their collective hawkish comments helped break support in the gold market leading to an end of the week sell-off that extended into Monday’s session.

Driving today’s early weakness are late Friday’s comments from Richmond Fed President Thomas Barkin, who said central bankers were inclined towards faster, front-loaded interest rate increases, even if that meant risking a U.S. economic recession.

Barkin’s Hawkish Tone Was Primarily In Line With The Other Major Speakers

St. Louis Fed President James Bullard said that given the strength of the economy, he is currently leaning toward supporting a third straight 75-basis-point interest rate hike in September.

San Francisco Fed President Mary Daly said hiking rates by 50 or 75 basis points at the Fed’s next policy meeting on September 20-21 would be a “reasonable” way to get short-term borrowing costs to “a little bit above” 3% by the end of this year, and on their way to a little bit higher in 2023.

Kansas City Fed President Esther George said she and her colleagues would continue to debate the question of how fast to raise rates, but that they would not stop tightening policy until they are “completely convinced” that inflation is coming down.

Minneapolis Fed President Neel Kashkari, the most hawkish of Fed policymakers, said the central bank needs to “urgently” bring down inflation. “The question right now is, can we bring inflation down without triggering a recession?” he said at an event in Wayzata, Minnesota. “And my answer to that question is, I don’t know.”

Daily Forecast

Today’s bearish factors include rising Treasury yields and a stronger U.S. Dollar. The jump in the chances of a 75-basis-point rate hike on September 21 is also contributing to gold’s weakness.

Not only are higher Treasury yields making the dollar a more attractive investment, but increasing bets for a global recession are also driving up its safe-haven appeal.

Global investors are seeking protection in the greenback for a number of reasons including Russia’s planned shutdown of a key pipeline that supplies natural gas to Germany, and China’s decision to slash its benchmark interest rate in order to stimulate a weakening economy.

The strong dollar is driving down foreign demand for dollar-denominated gold.