Gold Monthly Forecast – December 2018

Gold gained positive price action following successful Sino -U.S. trade talks that ended on 90 day truce resulting weak USD and increased demand for Spot Gold. Investors now await FOMC forward guidance and update on geo-political events for direction cues.
Colin First

The month of November 2018 was highly positive and profitable for US Dollar denominated Gold in spot market as news driven momentum amid relatively weaker greenback gave investors plenty of opportunity to see short term profit.  Gold opened positive but traded bearish across the first week of November as Dollar which was near 16-month high at start of month saw subdued demand owing to US mid-term election which boosted investors risk appetite leading to investors avoiding precious metal investments as it was non-interest yielding assets while risk assets offered higher volatility during election times making gold less attractive in eyes of global investors. However some retail investors began stocking up on small volumes of gold is spot market as price per ounce fell below $1210 and went as low as $1206 per ounce. But the during the period when election was going on, spot gold market saw high level of activity as investors temporarily direction some level of fund flow towards safe haven assets as back up.

Geo-Political Issues Dictate Price Action

After first week’s Fed meeting and positive U.S. economic data, dollar gained strength in broad market which was highly negative for USD denominated precious metals and gold price fell to monthly low of $1196.32 an ounce at which point gold in spot market began recovering momentum owing to bargain-hunting and gained additional support from physical market as it had been a while since gold fell  below $1200 per ounce making it a wonderful opportunity to stock up on both virtual and physical gold. Optimism surrounding Sino-U.S. trade talks and slide in US Treasury Yields caused USD to turn weak in broad market boosting demand for Gold given its low price. Unstable UK politics and Brexit woes also invigorated a little bit of safe-haven buying in the market along with bearish rout in Wall Street equities helped gold to begin building up upward momentum.

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The third week saw gold maintain positive price action across the week amid bearish rout in global equities ahead of thanksgiving holiday seasons which along with news that Federal Reserve officials expressed caution over the global economy, prompting traders to reassess the pace of future U.S. interest rate hikes dented demand for USD in broad market greatly boosting demand for Gold as most preferred safe haven asset increasing the yellow metal’s luster. While gold traded positive across the week upside was limited owing to lack of volatility amid holiday thin market on account of US thanksgiving celebrations. However as risk appetite increased in Asian and European market during thanksgiving holidays gains in spot gold was capped resulting in range bound price action with bullish bias across the week.

Gold Traded Range Bound Ahead of G20 Summit Owing to Mixed Signals From President Donald Trump

The last week saw Gold start of to a subdued range bound price action amid mixed cues from US President Donald Trump ahead of much awaited G20 summit where Trump was expected to meet with Xi jingping in sidelines and discuss trade related topics. Gold also gained positive influence following dovish comments from Fed chair Jerome Powell who said that interest rates are just below neutral, which signaled that the U.S. central bank is closer to the end of its rate hike cycle. A weaker greenback would make the dollar-denominated gold cheaper for other non-U.S. buyers. While price action indicated that corrective rally from monthly lows may have come to an end, gold closed for the month on highly positive note seeing considerable gains in process.

Gold gained significantly as trading session opened for December owing to headlines which indicated positive outcome in Sino-U.S. talks that took place in sidelines of G20 summit where both parties involved agreed to temporary truce which will last for 90 days when main issues such as forced technology transfer and intellectual property theft by Chinese entities will be discussed in new negotiations of trade related talks. Worries about rising interest rates have been a major factor working against the precious metal over the past few months, though the recent volatility in global markets prompted some buying interest in gold. The minutes from the Fed’s November 7-8 meeting showed that officials are on a course to raise interest rates this month, but they appeared more tentative about the pace of increases after that. Moving forward, Gold is still a dollar story so traders will be paying close attention to what the Fed will say at its final meeting of the year. The forward guidance will serve as key factor that could have significant impact on price of Gold during month of December 2018. Investors are also on lookout for updates from key geo-political events as they will provide short term opportunities to make profits.

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