Gold Fundamental Forecast – January 20, 2017

Gold futures fell on Thursday as investors continued to react to hawkish comments from Fed Chair Janet Yellen the previous day. However, the market remains on track to finish the week with a higher close. Rising Treasury yields and a firmer U.S. Dollar also underpinned the market on light trading ahead of Friday’s inauguration of U.S. President-elect Donald Trump.

February Comex Gold futures closed at $1201.50, down $2.20 or -0.18%.

In economic news, better-than-expected housing and jobs data reinforced the notion that the U.S. economy is growing sufficiently to warrant an interest rate hike as soon as perhaps March.

U.S. Building Permits came in at 1.12 million units, in line with expectations. Housing Starts rose 1.23 million units, well-above the 1.19 million unit estimate and the 1.10 million unit rise reported last month.

Weekly Unemployment Claims were much lower than expected at 234K. Traders were looking for 252K. The Philly Fed Manufacturing Index was also a robust 23.6 compared to the 16.3 estimate and the 21.5 previous read.

Forecast

Earlier today, Fed Chair Janet Yellen took a less-hawkish stance compared to Wednesday’s comments, when she suggested the central bank may raise rates slowly as not to harm the recovery that she seems to continue to think is still fragile. This news may be enough to underpin the market.

There are no major reports on Friday, but all eyes and ears will be on Trump’s inauguration speech. Going into the speech, scheduled for about 1715 GMT, we may see some safe-haven buying.

No one is certain if Trump is going to talk about his economic plans. However, you have to be prepared just in case he does. If he does talk about his plans to stimulus the economy then we could see Treasury rates, the U.S. Dollar and stocks rise. This would put pressure on gold.

If he sticks to protocol and delivers a quick speech about the state of the nation then gold may remain steady throughout the session.

I’m leaning to the former. I think he’s going to forego talk about the economy and instead deliver a speech on the importance of uniting the country towards one goal.

At this time, Trump’s aides are playing down how much work will be done during the first day in office. They say the real work will begin on Monday. He may sign four or five executive orders dealing with logistics and government operations Next week, he may start to unravel some of the regulations that he seems to think are financially burdensome.