Gold Fundamental Forecast – November 29, 2016

A combination of events helped drive up gold futures on Monday. The market started out higher as several major players returned, after a week-long absence due to the holiday-shortened week in the U.S, to prices sitting near a 9 ½ month low. This brought out the profit-takers and the bargain-hunting, bottom-pickers.

A decline in U.S. Treasury yields helped drive the U.S. Dollar lower after the Greenback traded up to 13-year highs last week and following a nearly 4 percent rise since the U.S. presidential election. The lower dollar helped boost foreign demand for the dollar-denominated gold futures contract.

U.S. equity traders also took a breather after a tremendous rally since the election of Donald Trump. This move also helped underpin gold prices. A rising Japanese Yen and Euro also helped pressure the U.S. Dollar.

There was very little economic news on Monday. The Dallas Fed manufacturing survey rose to 8.8 in November from 6.7 in October, but hardly anyone noticed.

February Comex Gold closed at $1196.40, up $15.40 or +1.30%.

Forecast

Gold is going to continue to react to the same key indicators: U.S. Treasury yields, the U.S. Dollar and U.S. stock indices. Look for gold to rally sharply higher if all three come in weaker on Tuesday and for gold to trade mixed if they aren’t all moving in the same direction.

Traders will get the opportunity to react to several economic events on Tuesday.

U.S. Preliminary GDP is expected to rise 3.0%, from 2.9%. The S&P/CS Composite-20 House Price Index is expected to show an increase of 5.3%, up from 5.1%. Consumer confidence is expected to rise to 101.3 from 98.6. This is important because it will reflect people’s opinions of the economy following the election of Donald Trump as president. If there is a surprise today, it will come from this report.

Finally, FOMC Member William Dudley is scheduled to speak along with FOMC Member Jerome Powell.

The direction of the gold market today will be determined mostly by the reaction of Treasury yields to the reports. Higher yields will put a cap on gold prices. Lower yields will underpin the market.