Gold Fundamental Forecast – February 28, 2017

Gold futures rallied into a 3 ½-month high on Monday as investors added to long positions ahead of a speech by President Trump late Tuesday. Trump will speak to a joint-session of Congress and offer more clarity on his economic policy. The market, however, weakened into the close after the U.S. Dollar posted a late session rally.

April Comex gold futures closed at $1258.80, up $0.50 or +0.04%.

Gold prices surged last week after the Fed released less-hawkish-than-expected minutes from its early February meeting. Prices were primarily supported by remarks from Treasury Secretary Steven Mnuchin last Thursday. Mnuchin said that he expects Trump’s tax reform plan to get confirmed by Congress before its August recess.

This news helped drive U.S. Treasury yields lower because it likely means that Trump’s other economic plans will be delayed. Lower rates usually make the dollar a less-desirable investment which boosts demand for gold.

Forecast

Gold may trade sideways today while straddling a key technical pivot area at $1261.10. Trader reaction to this price will tell us if the buying is getting stronger.

Investors are not expected to jump into the market ahead of Trump’s speech which could lead to lower-than-average volatility and volume on Tuesday.

Trump is likely to discuss his planned tax reforms, however, we already know it may take until August to get it approved by Congress. So it may not matter what he says because nothing is expected to get accomplished over the near-term.

Trump my also discuss his plans for fiscal spending. This too may cause a muted reaction because of time constraints. If gold does break on the news then it is likely to be short-lived.

Basically, anything that Trump says will need to be turned into actual legislation by Congress and there may not even be enough support there because even the Republican Congress is having trouble accepting Trump’s agenda.

Before Trump’s speech, investors will get the opportunity to react to the latest U.S. preliminary GDP report for the 4^th quarter. It is expected to show a gain of 2.1%. Consumer confidence is expected to come in at 113.3, down slightly from the previous 111.8.