Gold Monthly Forecast – March 2018

The gold prices were once again at the mercy of the dollar over the last month as the demand for gold remained mostly constant and the risk sentiment around the globe also remained fairly stable which left the gold prices under the whims and the fancies of the dollar. The strength of the dollar waxed and waned during the course of the month which led to a lot of volatility in the gold prices.

Gold Prices Volatile

But the curious thing during the month was the fact that the gold prices never got out of the range and the entire month was spent between the 1300 and 1360 regions. Though the market tried to stage a breakout on either side, that did not happen ultimately and we saw the prices tick to the range and consolidate. This shows that a breakout in either direction in the coming months is likely to be very strong but it remains to be seen whether that would happen anytime in the short or the medium term.

In many of our daily and weekly forecasts, we have been mentioning the underlying weakness in the gold prices. This weakness is due to the fact that the interest rates around the world, in many of the major countries, have begun to rise again. This is especially true in the US where the market expects the Fed to hike rates atleast 3 times during the course of the year. With the interest rates rising, it is natural for investors to divert their funds into the rate and bond market in hope of better and more stable returns. When this happens, the funds tend to get pulled out of the gold market and that is why we have been saying that the gold market is likely to be under pressure in the medium term as the global economic powers go about hiking their rates and supporting their respective currencies. So, of the best methods to trade the gold markets in the short and medium term would be to short the market whenever there is a bounce and have the stop loss just beyond the resistance that is likely to be closeby. Every approach of the 1360 region is likely to provide the traders with that opportunity.

Gold Price Breakout Unlikely

Looking ahead to the coming month, the tone for the rest of the month is likely to be set in the first couple of weeks with a lot of data set to come in from the US. The Fed has a new Chief in Powell and so far, he has toed the line of the rest of the Fed member in painting a hawkish picture of the US economy and this is bound to be supportive of the dollar. But for the Fed to continue on the plan for accelerated rate hikes, it is important for the incoming data from the US to be strong and that is why the incoming data during the first and second weeks of the month are likely to determine the trend for the month.

Also, the market expects the Fed to hike rates for the first time this year in March and hence the traders would be looking for the same and also for pointers and hints for the future rate hikes as well. All these events are likely to keep the gold prices under pressure, assuming that they all go according to the plan that has been set. If the incoming data or the Fed trips up, then we could see the gold prices make their way back to the range highs once again. The geopolitical factors are also likely to have a say in what happens in the coming month as the Trump administration has a habit of surprising the markets with their actions and keeping the investors on tenterhooks.