Gold futures are edging higher on Tuesday as bullish traders continue to bet the U.S. Federal Reserve will remain dovish on Wednesday after it announces its latest interest rate and monetary policy decisions. Furthermore, the latest Federal Open Market Committee economic projections could indicate that Fed policymakers are looking for the economy to turn lower later in the year.
At 13:14 GMT, April Comex gold is trading $1308.50, up $7.00 or +0.54%.
Expectations of a slowdown in the economy later this year will allow the Fed to remain “patient” with future rate hikes, which means gold is likely to remain underpinned. Furthermore, gold prices could soar if the Fed hints that it may not raise rates at all in 2019.
“U.S. economic growth is set to slow sharply this year and next,” according to respondents to the CNBC Fed Survey for March, “and weaker global growth and tariffs are seen as the major culprits.”
“The outlook for slower growth has prompted the 43 survey respondents to lower their expectations for Fed rate hikes this year and next – barely forecasting one hike and some even seeing rate cuts on the horizon.”
“Sixty percent still see a rate hike this year, but that’s down from 78 percent in the January survey. And now 14 percent forecast a rate cut, rising to 35 percent in 2020.”
Gold investors are positioning themselves ahead of Wednesday’s Fed announcements and economic projections, and the positive tone suggests they expect to see a dovish tone from the central bank. This may be just enough to underpin prices.
Gold prices could spike to the upside, however, if the Fed is more dovish than previously expected.
In other news, today’s U.S. Factory Orders report, due to be released at 14:00 GMT, could move the gold market somewhat. A weak number will be supportive for gold. Traders expect the report to show a 0.3% increase.