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Gold Monthly Forecast – December 2017

By:
Colin First
Published: Dec 3, 2017, 06:31 UTC

Gold prices continued to range for the month of November, something that it was doing during October as well, as the prices failed to make much progress.

Gold Monthly

Gold prices continued to range for the month of November, something that it was doing during October as well, as the prices failed to make much progress. The market continued to price in the rate hike from the Fed in December and the lack of major fundamental and economic drivers also contributed to the consolidative phase in the prices. We expect more of the same in the coming month as we head towards the end of the year when the liquidity is expected to dry up.

Gold Prices Consolidate and Range

The gold prices have been caught within a range over the past couple of months. The demand for gold has not picked up to the extent that many would have expected. The changes in the rate cycle from the various central banks is also beginning to have an effect on the gold prices and we believe that this would continue in the medium term. We are seeing the central banks switch from a period of lowering the rates or keeping them steady to a phase when they are looking to hike rates. We are already seeing the UK, US and Canada hiking rates and this has helped the stock markets in these countries to move higher.

Gold Weekly
Gold Weekly

What this has also done is made the bond and the interest rate markets in these countries also very competitive in terms of returns and they have come to challenge gold in terms of returns and this has led to the migration of large amount of funds from the gold market to the bond markets and this has added a lot of pressure to the gold prices. This phase is expected to last for quite some time and the fact that there has not been much demand for gold has only added to the price pressure. We had the Fed almost confirm the rate hike in December and the fact that the pricing in of the same has been done is also a contributing factor for the weakness in the gold prices. We did see the prices make attempts to break through the range on both sides, many times, during the course of the month but all such attempts were beaten back on either side and the ranging and consolidation continues.

Also, there has been an increase in risk sentiment during this period though the Korean region continues to be a cauldron. But the missile tests and the statements from North Korea have become so frequent that the market seems to be tired of the same. That is why the threats from North Korea over the last month or so have been largely ignored by the markets and have had little impact during this period and we believe that the market would continue with its lack of response in the future as well.

Expect More Consolidation

Looking ahead to the month of December, as expected, we can safely say that the liquidity would dry up during the second half of the month. It remains to be seen whether this lack of liquiity would lead to some slow trading or whether this would be used as an opportunity to push the prices in either direction through the range. We are also going to see the Fed announce the hike of its rates and this could lead the gold prices towards the lows of its range as a knee jerk reaction.

But this move is likely to be short lived as we expect the prices to stabilise. As we have mentioned earlier in the article, the rate hike in the US in December is almost fully priced into the markets and hence it would not surprise anyone if it does happen. What the market would be more concerned about are the hikes in 2018, their number and timing as well. With the new Fed Chief taking over in February 2018, it is only going to increase the uncertainty surrounding the policies and hence we expect the dollar to continue to be under pressure heading towards the end of the year and this should keep the gold prices within range and we believe that the consolidation would continue in the coming month.

 

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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