Yahoo Finance Price of Gold Fundamental Daily Forecast – Dovish Fed Doesn’t Guarantee New Bull Market
Gold futures inched up to a three-week high on Thursday on the back of yesterday’s dovish U.S. Federal Reserve monetary policy decisions. On Wednesday, the Fed eradicated any chances of an interest rate hike this year, while slashing its growth forecasts for the rest of the year. In doing so, the Fed joined the other major central banks in raising concerns over a global economic slowdown.
At 10:00 GMT, April Comex gold is trading $1317.70, up $16.00 or +1.24%.
The U.S. Federal Reserve kept its benchmark interest rate unchanged on Wednesday as widely expected and said in its monetary policy statement that it doesn’t expect to hike rates for the rest of the year. That’s a major change from its December policy statement when it said it expected to raise rates at least two times. Furthermore, Federal Reserve Chairman Jerome Powell said he expects a “slowdown” but not a recession. Additionally, the central bank also expects the U.S. economy to expand at 2.1 percent this year, below its previous projections.
The Fed also said that in May, it will begin tapering the amount of proceeds it allows to roll of its balance sheet each month.
The dovish Fed triggered a steep plunge in U.S. Treasury yields, helping to make the U.S. Dollar a less-attractive investment while increasing demand for dollar-denominated gold.
Daily Forecast
The next major move in gold will be determined by a combination of factors including the direction of U.S. Treasury yields, the strength in the U.S. Dollar and demand for risky assets.
Gold could see further upside pressure over the long-term if the slowing economy worsens and opens the door for a potential rate hike later this year if the economy slows as much as some analysts fear.
In the financial futures markets, traders have become more convinced that the Federal Reserve will be more accommodative on interest rates and this should put further downside pressure on the U.S. Dollar, and increased upside pressure on gold.
“The fed funds futures market is assigning a 47.8 percent probability of at least one rate cut by January 29, 2020,” according to the CME’s FedWatch tool.
Futures contracts are also implying a 39 percent probability of a rate decrease by December 11, up from only 23 percent before the Fed’s policy decision at 18:00 GMT on Wednesday.
Traders should note that just because the Fed turned increasingly dovish, a bull market in gold is not a given. Gains could be limited by a surge in demand for risky assets like stocks. Furthermore, safe-haven demand for the U.S. Dollar due to concerns over U.S.-China trade relations could also put a lid on gold prices.
This article was originally posted on FX Empire
