Gold Fundamental Forecast – November 22, 2016

Gold futures firmed on Monday, supported by a weaker U.S. Dollar and greater demand from Asia. December Comex Gold closed at $1209.80, up $1.100 or +0.09%.

The market stopped going down late last week after Fed Chair Janet Yellen issued her strongest statement to date about the possibility of a Fed rate hike in December. This seems to suggest that gold sellers have fully-priced in the central bank’s expected decision.

Asian buyers are being aggressive this week due to relatively cheap prices and a lower price adjustment by the U.S. Dollar. Asian investors are also taking advantage of the thin pre-holiday trading conditions in the U.S.

Forecast

It’s going to take a combination of a weaker U.S. Dollar and aggressive technical buying to rally gold prices on Tuesday. A weaker stock market will also help. Yesterday’s spike in the major indices probably put a lid on a gold market rally on Monday.

Gold is building a support base on the daily chart. This suggests it is waiting for news to drive it out of its short-term range. We may not get any news this week, but if the dollar continues to sell-off and Treasury yields continue to hold steady then gold may rally.

Crossing to the strong side of a major resistance level at $1218.50 will be the first sign of increased buying. Taking out $1233.10 will change the main trend to up. This could create enough upside momentum to trigger a steep rally into at least $1269.80.

An upside bias appears to be building, but it is going to take a major catalyst to drive this market sharply higher. The catalyst is likely to be a combination of lower equity prices, a weaker U.S. Dollar or both.