Fundamental Daily Gold Price Forecasts

Gold futures are edged higher on Wednesday morning as traders continue to weigh the chances of an anticipated interest rate hike by the Federal Reserve against rising cases of Omicron coronavirus variants that could slow economic recovery and labor market growth. Stable Treasury yields and a slightly weaker US dollar are also helping to support prices.

With the labor market in the center of attention this week, today’s report on the development of nonfarm employment from ADP could have an impact on the direction of the market at the start of the session, while that later today, the minutes of the Federal Open Market Committee (FOMC) meeting could influence the share price.

As of 11:16 GMT, February Comex gold futures are trading at $ 1,819.40, up $ 4.80 or + 0.26%. On Tuesday, the SPDR Gold Shares ETF (GLD) came in at $ 169.60, up $ 1.27 or + 0.75%.

Treasury yields fall as investors await Fed meeting minutes

U.S. Treasury yields are lower on Wednesday morning, helping to support gold prices, with the minutes of the Federal Reserve’s December policy meeting due to be released later today.

The benchmark 10-year Treasury bill yield fell 2 basis points to 1.6438% at 09:15 GMT. The yield on 30-year Treasury bills fell 3 basis points to 2.047%.

Investors will take a look at the December Fed meeting minutes, which are expected to be released at 19:00 GMT on Wednesday.

Fed Minutes on Tap

After its December meeting, Fed policymakers said they would speed up the reduction in its monthly bond purchases. Fed officials have also indicated that they expect up to three interest rates to come in 2022.

The Fed made its intentions pretty clear in its latest policy statement, so the minutes shouldn’t offer many surprises. That being said, markets may have already taken in many of the expected interest rate hikes over the next several years, in part due to inflation concerns. But traders are still not clear on the conditions necessary for the first rate hike. This can be the source of volatility.

ADP labor market data to be closely watched

Payroll services firm ADP is expected to release its December employment development report at 1:15 p.m. GMT. It should show that the private sector of the economy created 405,000 jobs last month. Jobs data is one indicator the Fed uses to help determine its timetable for tightening monetary policy.

Short term outlook

The Fed’s announcements after its December meeting were initially interpreted as bearish with prices falling to $ 1,753.00. However, since then gold has climbed $ 80.00. This is probably because investors are not sure when the first rate hike will be. This has been the source of the volatility this week.

At the end of 2021, gold traders had expected a first rate hike in June, but market sentiment quickly changed on Monday, with 70% of investors now looking for a rate hike in April. This drastically reduced the prices.

Tuesday’s November Job Openings and Workforce Turnover (JOLTS) survey put an end to those plans when it showed a record 4.53 million workers Americans quit their jobs this month. As a result, gold prices have rebounded since the news broke.

This gives a lot of weight to today’s ADP report and in particular to Friday’s US Non-Farm Wages report. They have to show that the economy has created enough jobs to keep the recovery on track to pre-pandemic levels, otherwise the market could reverse expectations of a rate hike in April.

The bottom line is this: Strong jobs data will translate into an early rise in rates and lower gold prices. Weak labor market reports will push back expectations for rate hikes and support higher prices. It all starts with today’s ADP report.

Richard L. Militello