Gold Fundamental Forecast
Gold prices traded mostly flat on Monday on low volume and volatility as investors stayed on the sidelines ahead of the start of the Fed’s two-day meeting. The price action is continuing into Tuesday’s session.
At this time, a rate hike is widely expected by gold traders and probably priced into the market so the downside may be limited by the headline news, however, gold could resume its down trend if the central bank comes out hawkish in its statement especially if it indicates more frequent rate hikes this year.
April Comex Gold futures closed at $1203.10, up $1.70 or +0.14%.
Gold traders may also be positioning themselves ahead of Wednesday’s election in the Netherlands. The chance of an upset is seen as small, but investors remember Brexit and may want to take some protection in gold just in case there is a surprise. If there is a surprise outcome then investors may even increase their positions in gold in anticipation of a surprise result in the French presidential elections in April and May.
We anticipate a sideways trade over the near-term in gold because the European elections and uncertainty over President Trump’s policies are likely to be supportive while the increased chances of future Fed rate hikes will provide the resistance.
In economic news, traders will get a chance to react to the latest data on Producer Inflation on Tuesday. Month-over-month PPI is expected to rise 0.1%. This will be less than the previous 0.6% read. Core PPI is expected to come in at 0.2%, also lower than the previous 0.4% read.
The reaction by gold traders to the PPI report is likely to be subdued because of Wednesday’s consumer inflation report and the Federal Open Market Committee’s interest rate decision and monetary policy statement.