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Price of Gold Fundamental Daily Forecast – Fed Speakers, PMI Data Possible Sources of Volatility

By:
James Hyerczyk
Published: Sep 23, 2020, 10:13 UTC

Gold fell for a third session on remarks from a key Federal Reserve official on the state of the economy and the possibility of an interest rate hike.

Comex Gold

Gold futures hit their lowest level since August 12 on Wednesday as the U.S. Dollar strengthened on concerns about rising COVID-19 cases in Europe, while doubts continued to linger over further stimulus from the U.S. Federal Reserve. Meanwhile, the U.S. Dollar Index is pressing its highest level since July 24, bolstered by Tuesday’s upbeat U.S. home sales data and worries about a second wave of coronavirus infections in Europe.

At 09:43 GMT, December Comex gold is trading $1891.30, down $16.30 or -0.85%.

Gold also fell for a third session on Wednesday on remarks from a key Federal Reserve official on the state of the economy and the possibility of an interest rate hike.

Existing Home Sales Jump to 14-Year High, as Prices Set Another Record

After a record-setting July, the housing market still shows no signs of cooling off. Sales of existing homes rose 2.4% to a seasonally adjusted annualized rate of 6 million units, according to the National Association of Realtors. Sales were 10.5% higher compared with August 2019. This is the highest sales pace since December 2006, before the Great Recession.

Sales were hampered only by the lack of supply. There were 1.49 million homes for sale at the end of August, down 18.6% annually to a 3.0-month supply. The number of homes for sale were last this robust, in 2006, was more than double the current supply.

That tight supply pushed the median price of an existing home sold in August to a record high of $310,600. That is up 11.4% annually. In the third quarter of this year the housing wealth will have increased by $1.5 trillion from the second quarter.

Fed’s Evans See Risks of ‘Recessionary Dynamics’ Without More Fiscal Stimulus

It is important that Congress pass more spending to help the economy during the pandemic or there is a risk the economy sinks in a downward spiral, Chicago Fed President Charles Evans warned Tuesday.

“Every week and every month we go without renewing additional fiscal support…we risk a longer period of slower growth if not recessionary dynamics,” Evans said during a discussion sponsored by OMFIF, an international forum for economic policy.

Evans said he was surprised to see how strong the economy has rebounded from the lockdown in April and May. The economy is back about 90% even though the toll of deaths has been “horrific,” Evans said. Manufacturing has “come way back” led by the auto sector, he said.

Daily Forecast

The dollar got a boost and gold took a hit on Tuesday after Chicago Fed President said, “I would like to raise rates as soon as anybody,” Evans said. For me, that’s going to be when the economy is very very strong and real interest rates are rising,” he said. “Monetary policy in some sense would follow the economy up,” he said.

“We could start raising rates before we start averaging 2%, we need to discuss that, he added.

Evans’ comments caught gold traders off-guard and that could lead to even more bearishness if other Fed speakers reiterate his concerns. Traders will be listening for clues from FOMC Members Loretta Mester and Randal Quarles as well as Fed Chair Powell on their take of the economy and whether further quantitative easing may not provide an additional lift to the U.S. economy.

We could also see a volatile reaction to the downside if the Flash U.S. Manufacturing PMI report comes in over the 53.1 previous reading.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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