Gold Price Talking Points

The price of gold consolidates after trading to a fresh monthly high ($1877), and data prints coming out of the US may keep bullion afloat as Federal Reserve officials now brace for sticky inflation.

Fundamental Forecast for Gold Price: Neutral

The recent breakout in the price of gold appears to have stalled as the upbeat US Retail Sales report puts pressure on the Federal Reserve to deliver a rate hike sooner rather than later. The precious metal may face a larger pullback ahead of the next interest rate decision on Dec. 15 as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).

Looking ahead, it remains to be seen if the fresh forecasts from Fed officials will sway market expectations as Chicago Fed President Charles Evans, who votes on the FOMC this year, argues that the figures from the September meeting are “stale” and believes that the “supply chain issues are going to be rectified” in 2022.

As a result, President Evans insists that the Fed “will be in a better position to understand where future inflation pressures are going to go” once the central bank finishes winding down its emergency measures, and the FOMC’s exit strategy may continue to lift longer-dated US Treasury yields as the committee prepares for a “more neutral setting for monetary policy.”

Nevertheless, the update to the Personal Consumption Expenditure (PCE) Price Index is likely to overshadow the FOMC Minutes if the Fed’s preferred gauge for inflation increases for 11 straight months, and another uptick in the headline and core reading may prop up the price of gold as the central bank appears to be on a preset course.

With that said, the Fed’s gradual approach in removing monetary stimulus may prop up the price of gold throughout the remainder of the year as signs of persistent inflation encourages market participants to hedge against inflation.