Gold Fundamental Forecast – December 12, 2016

Gold prices closed lower on Friday and the market headed into its fifth straight week of losses. The market was pressured by a stronger U.S. Dollar and expectations of a Federal Reserve rate hike on December 14.

February Comex Gold futures closed at $1161.90, down $10.50 or -0.90%.

Rising stock prices were also behind the selling pressure because they compete for the same investment dollar. At this time, stocks are a more favorable asset.

The dollar went on tear late last week after the European Central Bank said it would extend its quantitative easing program until December 2017. Additionally, it is going to reduce purchases to 60 billion Euros per month.

Traders interpreted the ECB’s decision as dovish, setting the Euro sharply lower and the U.S. Dollar higher.

Forecast

The trend is down, momentum is down and the fundamentals are bearish. Therefore, I have to conclude that we’re likely to see more selling pressure on Monday. I can’t predict whether there will be a short-covering rally due to profit-taking, but this is certainly possible.

At this time, I can’t foresee any event that will help put in a bottom although we could have a “sell the rumor, buy the fact” situation after the Fed decision on Wednesday.

The daily and weekly charts indicate the next major support doesn’t come in until $1055.20. I think that aggressive bottom-pickers have been slowing down the inevitable, but they will eventually run out of money and the market will collapse at some point. All they are doing is creating a periodic two-sided trade, however, all of the rallies have been met my renewed selling pressure.

If gold is going to have any chance at a prolonged rally then Treasury yields and U.S. stock indices are going to have to come back to earth.

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