Gold Fundamental Analysis – Forecast for the Week of January 23, 2017

Concerns over Brexit and Trump’s ability to run a government helped boost gold futures early in the week, but prices pulled back on technical factors and as worries dissipated about Brexit and Trump late in the week.

April Comex Gold futures finished the week at $1207.70, up $8.60 or +0.72%.

Gold received a boost early in the week on concerns over Brexit. The move was triggered by a 1% drop in the British Pound. The Sterling stabilized after Prime Minister Theresa May calmed the Brits, who since last June when they voted to leave the European Union, have been consumed with whether Brexit should be “hard” or “soft”. May all but ended that debate by saying Brexit means a clean and honest break from the EU.

Gold began to lose ground after the British Pound rallied so I have to conclude that Brexit had a bigger influence on the market than worries over Trump.

Forecast

Trump will get his chance to influence gold starting on Monday. As I’ve said before, he is a wildcard and he could spark a sell-off or a rally in the market on only a 140 characters in his Twitter account.

Gold traders are likely to remain jittery over Trump’s policies over the near-term. The market action and the direction of gold prices are likely to be determined by trader reaction to the dollar and stocks this week.

Last week, Trump said the U.S. can’t be competitive with China because the dollar is “too strong”. This helped push the dollar down and gold higher. Fed Chair Janet Yellen said the U.S. may see multiple rate hikes this year, but then followed up by saying the central bank will continue to remain cautious.

I expect to see an emotionally charged market this week. Because of the light economic report schedule, investors are likely to be sensitive to the news and to comments from Trump. This could create a volatile two-sided trade.

April Comex Gold closed higher last week, but well off its high. If momentum picks up again this week then look for a drive into last week’s high at $1221.80. If the rally is strong enough, we could see a rally extend into the major 50% level at $1235.60. This is followed by $1261.10.

If there is enough selling pressure to drive the market lower then we could see an eventual test of the short-term retracement zone at $1174.50.