Gold Prices Forecast: Looking For Breakout Trigger, Fed Expectations To Dominate
New York (April 30) Gold has been confined to relatively narrow ranges during the past week and markets will be looking for key US data releases and the Federal Reserve statement to see whether a breakout can be achieved. The most likely outcome looks to be for small-scale gold losses for the week as rallies attract some selling interest.
The Federal Reserve will announce its latest monetary policy decision on Wednesday. There are no real expectations of the Fed sanctioning a further increase in interest rates, especially after the move to raise rates in March. There will also not be any fresh interest rate projections from the individual FOMC members.
The statement will still be an important signal of intent for the FOMC and there will be hints surrounding potential action at June’s meeting.
Gold will be vulnerable to significant selling if the Fed adopts a generally hawkish tone while prices will tend to gain support if the statement hints that a June hike is unlikely.
There are a series of important US data releases during the week, which will have an important impact on precious metals and gold.
The ISM manufacturing data will be released on Monday followed by the non-manufacturing release on Wednesday. Any evidence of a significant slowdown in the economy would tend to unsettle market sentiment.
The ADP employment report will be released on Wednesday and this has sparked considerable volatility over the past three months with headline figures well above consensus expectations.
The ADP data will set the tone for Friday’s crucial employment report with markets expecting a rebound in non-farm payroll growth following the much weaker than expected 98,000 March increase. In an immediate reaction, gold will gain strong support if there is another weak reading.
Overall, individual events may not be sufficient to secure a big move for gold. A consistent run of weak or strong data would, however, be important in driving expectations for June and beyond, which would have the potential to trigger a sharp move in gold.
The French Presidential election will be a significant focus ahead of the second-round run-off between Macron and Le Pen on May 7th. Opinion polls have consistently pointed to a comfortable victory for Macron, but there is some risk of complacency and gold will gain significant support if there is evidence that the race is tightening.
Eurozone economic developments are unlikely to have a major impact on the week.
Rhetoric from US President Trump will need watched very closely during the week with a particular focus on trade. A tough stance from Trump and further threats to pull out of trade deals would tend to reinforce global protectionism fears and provide net support to gold.
Wider geo-political risks will also be important and there will be support for gold if tensions surrounding North Korea increase once again.
Source: EconomicCalendar
