Price of Gold Fundamental Daily Forecast – Bulls Hoping Fed Minutes Reveal Coronavirus Concerns
Gold futures are trading higher on Wednesday despite slightly better U.S. Treasury yields and increasing demand for higher risk assets. Additionally, traders appear to be ignoring reports showing a slowdown in the number of cases of coronavirus in China.
The price action suggests the market is being supported by strong technical momentum and concerns that the virus has caused greater-than-expected damage to the global economy, which may prod the major central banks into providing stimulus.
At 09:31 GMT, April Comex gold is trading at $1611.40, up $7.80 or +0.49%.
Coronavirus Update
China reported 1,749 new cases, the lowest daily rise since January 29, bringing the total number of those infected to over 74,000, with 2,004 deaths.
Inverted Treasury Yields
Gold traders are paying attention to the inverted U.S. Treasury yield curve, much like they did in August 2019. The reason is the move is seen by many as a recession signal. A recession would mean more Federal Reserve stimulus, which would be bullish for gold.
Global Equity Market Strength Could Be Capping Gains
Stocks in Asia finished higher. European shares are trading better and the major U.S. stock indexes are expected to open firm. These moves are reducing demand for gold as a hedge against a steep decline. This could be putting a lid on today’s gold market rally.
Daily Forecast
While most of the price action will be driven by the direction of U.S. Treasury yields and U.S. equity markets, traders will still be watching the Producer Price Index (PPI) report for January as well as reports on housing starts, building permits and a business leaders survey for February. All will be released at 13:30 GMT.
The major concern for investors will be the Fed minutes. The Federal Reserve Open Markets Committee (FOMC) will release the minutes from its latest meeting on Wednesday at 19:00 GMT. Traders will be looking for clues about the future of interest rates, and how much policymakers discussed the impact of the coronavirus on the U.S. economy. Last week, Fed Chair Jerome Powell said there would be some damage to the U.S. economy, but that it was too early to tell how much.
The fed held its benchmark interest rate steady in its meeting last month, but slightly tweaked its post-meeting statement to say that its policy was aimed toward inflation returning to the 2% inflation target. Previous statements said the Fed was trying to get inflation near that mark.
Some investors took the change as a dovish move by the Fed, suggesting that it would keep rates low or drop them further to boost inflation.
Gold could spike to the upside if the minutes reveal the Fed discussed the impact of the coronavirus more than expected at the January meeting.
This article was originally posted on FX Empire
