Gold Fundamental Forecast – January 11, 2017

Gold futures closed marginally higher on Tuesday after reaching a six-week high earlier in the session. The market was primarily underpinned by a weaker U.S. Dollar. The catalyst behind the strength this week has been concerns ahead of President-elect Donald Trump’s first press conference since the elections in November.

February Comex Gold closed the session at $1185.50, up $0.60 or +0.05%.

In economic news, the NFIB Small Business Index came in at 105.8, beating the estimate at 99.6 and the previous 98.4. The JOLTS Job Openings report came in at 5.54 million, slightly below the 5.59 million estimate, however, more than the previous read of 5.45 million. Lastly, Final Wholesale Inventories rose 1.0%, higher than the expected and previous 0.9%.

Forecast

Wednesday will be another light report day with the main focus on Trump’s press conference. Traders will be listening for clues and details about his plan to rebuild America, cut taxes and loosen banking regulations. Unfortunately, traders may be disappointed because he may be asked questions about topics that have been in the news lately, including conflicts of interest, Russian hacking and the repealing of Obamacare.

Shortly after his election in November, Trump made several promises including spending as much as a trillion dollar on U.S. infrastructure. Since then Treasury yields have risen and the Dow is up about 9 percent. The dollar also rose, making gold a less desirable investment.

Some feel that Trump is not likely to deliver anything of substance since he has not been inaugurated into office yet. This will take place on January 20. Furthermore, it will be an open field for questioning. This means anything goes from the press corps so Trump may not even get a chance to answer questions about the economy. However, he is wildcard so he may say a few things that create volatility in the markets.

If there is enough volatility to trigger a stock market break, then investors are likely to sell stocks and buy Treasurys, the normal reaction to such an event. A drop in Treasury yields will take the dollar down also. This would likely increase demand for gold.

From the technical side, gold changed its trend to up on Tuesday when buyers took out the December 5 top at $1190.20. However, there wasn’t much of follow-through to the upside which suggests the move was triggered by buy stops rather than fresh buying. If buyers can sustain a move over $1193.40 then we could see another $30 rally over the near-term. If $1180.20 fails as support then gold may fall back to $1157.50.