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Price of Gold Fundamental Daily Forecast – Steady after Fed Minutes Reveal No Surprises

Gold futures are slightly higher early Thursday after posting a lower close the previous session. Prices were actually under pressure before the Federal Reserve released the minutes from its last meeting, and stabilized into the close after the Fed news.

The price action suggests that gold traders were expecting what the Fed delivered and are now ready to move on to monitoring economic data that could encourage policymakers to alter their initial response to high inflation. One response could be bullish, the other bearish. However, it may take months before we see if the Fed’s tightening plans are working, which may mean a rangebound trade for gold prices.

At 03:41 GMT, August Comex gold futures are trading $1855.00, up $2.50 or +0.13%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $173.04, down $1.09 or -0.63%.

Fed Minutes Indicated Central Bank Unlikely to Get More Aggressive

Gold futures cut some dollar strength-driven losses late Wednesday after the minutes of the Federal Reserve’s May 3-4 monetary policy meeting suggested the central bank would raise interest rates by 50 basis points in June and July to combat inflation they agreed had become a key threat to the economy’s performance.

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The news may have actually been a positive for gold because now traders don’t have to worry about the dreaded 75-basis point rate hike they had feared about two weeks ago. Furthermore, the minutes seemed to indicate the Fed would take a wait and see approach until its September meeting before making any major adjustments.

This is all based on the Federal Open Market Committee (FOMC) members agreeing the U.S. economy is strong enough to withstand two 50-basis point interest rate hikes.

Daily Forecast

With the minutes put to bed, gold traders can now concentrate on the movement in U.S. Treasury yields and the U.S. Dollar. The two markets that ultimately determine the direction of gold prices.

The catalysts that move yields over the next two months will be inflation, economic growth and jobs data. To recap the Fed’s intentions. Policymakers want to raise rates enough to drive inflation down, while trying to preserve economic growth and a healthy jobs market.

From now until September when the Fed takes a look at the impact of the June and July rate hikes, gold prices are likely to be driven by U.S. economic reports.

Gold traders will get a chance to see how this works as early as Thursday with the release of the U.S. Preliminary GDP and Weekly Unemployment Claims reports.

The GDP data is stale since it is from the first quarter, but the initial claims data is current. The market is expecting a 217K reading. Anything larger will be a concern, but nothing to derail the Fed’s plans. However, it may encourage a few of the weaker gold short-sellers to trim their bearish positions.

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

This article was originally posted on FX Empire

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