Price of Gold Fundamental Weekly Forecast – Needs to Hold $1571.70 to Sustain Upside Momentum

Gold is trading sharply higher on Monday after gapping on the weekly chart. The ensuing intraday rally also took out last year’s high for the near at $1571.70. This level is new support since old top tend to become new bottoms. If it fails to hold then this won’t indicate the trend is changing, but it will be a sign that the selling is greater than the buying at current price levels.

At 10:21 GMT, February Comex gold is trading $1579.00, up $26.60 or +1.72%.

According to Reuters, spot gold surged close to a seven-year peak on Monday, as investors flocked to the safe-haven metal on escalating U.S.-Iran tensions.

Gold prices have been rallying since Christmas week with traders betting at that time on a break in the stock market due to excessive speculative buying. However, these early buyers received a gift on Friday when a U.S. airstrike in Iraq killed a high-ranking Iranian military official, sending gold prices sharply higher.

After the airstrike, Iran vowed retaliation. On Sunday, President Trump threatened sanctions against Iraq after Baghdad demanded that American and foreign troops leave, heightening fears of a wider conflict.

Further spurring uncertainty, Iran said it would drop limits on enriching uranium, taking a further step back from commitments to a 2015 nuclear deal with six major powers.

Lower Yields Driving the Price Action

U.S. Treasury yields fell on Monday as investors continued to monitor the escalating geopolitical tensions in the Middle East. It’s the plunge in yields that is making gold a more attractive asset.

Weekly Forecast

Tensions in the Middle East are likely to remain high over the near-term as traders await retaliation from Iran. The moves in the gold market are likely to be headline driven so expect volatility to remain at heightened levels. Furthermore, don’t try to trade unless you know your exit first.

In other news, a final reading of Services Purchasing Managers’ Index (PMI) for December will be released at 14:45 GMT. I don’t expect this report to have much of an influence on the gold market.

Traders should pay attention to the former main top at $1571.70 and Friday’s close at $1552.40. A move under $1571.50 will indicate the buying is getting weaker or the selling is getting stronger. A close below $1552.40 will produce a closing price reversal top. This will indicate a correction is coming.