Gold Monthly Forecast – March 2019

The price action of gold in the global market was well within my previous monthly forecast despite spot gold closing for the month of February on a dovish note. In my forecast for February, I had mentioned that the price action of gold is going to be influenced by and controlled by the proceedings of geopolitical events and that neither Sino-U.S. trade talks nor Brexit will see any resolution during February. Both predictions came true. However, the price didn’t hit a multi-year high as expected. In fact, the price of yellow metal didn’t even hit 2018 highs but managed to climb to new 10-month highs on a weak US dollar and increased demand for safe-haven assets. However, conflicting headlines with most updates hinting at positive proceedings in Sino-U.S. trade talks and rebound of US Dollar near the end of the month resulted in erasing most of the gains made in early February and closing on a dovish note. While headlines hinted at positive progress in Sino-U.S. trade talks initially, there wasn’t much progress and there were even conflicting comments near the end of the month. Further increased risk appetite at the last week of February also added to bearish influence in precious metals market taking away a significant amount of funds from the market.

The first three weeks of February 2019 saw positive price action in precious metals as cautious investor sentiment and increased demand for safe-haven assets owing to geopolitical issues boosted fundamental support for precious metals in the global market. Following a sharp decline in late January, the first week of February saw price action in gold recover steadily. Sino-U.S. trade talks related headlines and cautious influence inspired by the same in global markets underpinned demand for yellow metals and this helped with recovery rally. U.S.  President Trump had blamed China for intellectual property theft ahead of meeting between Presidents of both nations and also reaffirmed his commitment to building border wall which renewed fears of the US partial government shutdown being renewed once three weeks ended. These factors led to significant gains in the first week of February. The second week saw a further increase in demand as cautious sentiment was further boosted over the UK parliament session when key decisions regarding Brexit proceedings such as avoiding a no-deal exit and second Brexit referendum were expected to be voted upon.

Spot Price Hit New 2019 Highs But Failed To Hit Multi Year High’s

Gold gained further as news hit the market that US President Donald Trump had declared a state of national emergency to circumvent congress’s hold over budget allocation and redirect US defense budget worth nearly $6 billion USD to build a wall between the US and Mexico in the border. This caused a lot of issues in the country and pulled down the dollar sharply. Citizens blamed President Trump for falsifying data and nearly 16 different states filed a complaint in court against President Trump’s actions of declaring a national emergency causing nationwide uproar weakening USD in the global market and causing gold to hit 10-month highs. This was soon followed by high-level talks between Chinese Vice Premier Liu He and US President Donald Trump in White house. After the talks, President Donald Trump tweeted that talks proceeded in a favorable direction and that he was considering delaying the tariff deadline from March 1 with hopes of securing a trade deal between two nations. This caused a boost in risk appetite in the market and led to gold declining from multi-month highs but price action managed to remain range bound well above the critical support level of $1300 handle as investors were cautious ahead of the second UK parliament meeting and U.S.-N.Korean summit in Vietnam scheduled to occur in the last week of February.

But key decisions were postponed in the UK parliament once again to the next session on March 12 leaving Brexit progress hanging with no direction. Further, talks between U.S. & North Korea ended abruptly as US President Donald Trump deemed N.Korean Premier Kim Jong Un’s demand to remove all sanctions imposed by the U.S. immediately as an unreasonable demand. Also, U.S. Trade Representative Robert commented that despite optimistic comments from President Trump lot of work remains pending in trade talks with China and this hurt optimism surrounding trade negotiations between the two countries. While this gave yellow metal a short bullish boost, the price action ended on a dovish note as US GDP release near the end of February was unexpectedly high giving Dollar a bullish boost. The upbeat GDP data also influenced positive action in the US government bond market causing a positive spike in US T Yields supporting dollar bulls on their positive rally. This brought Gold price well near critical support levels. Further, official reports that the US is likely to keep current tariffs limited at 10% instead of 25% and no new tariffs are going to be implemented until further notice improved risk sentiment and boosted performance in the equity market as last week came to close. This caused gold to fall below $1300 handle ending the month on a dovish note.

High-Risk Appetite Likely To Keep Price Action Capped Below Critical Level

Moving forward this month, geopolitical issues remain the main theme and focus of investors attention. As the deadlines approach, Brexit is likely to see some serious progress unless there is a delay deadline and Sino-U.S. trade talks are likely to see a new milestone. The financial year comes to an end in March and investors are likely to book maximum profits before making any new major bets and risk on trading activity is likely to remain high in global markets and this should greatly limit activity – trading volume and fund flow in the precious metals market. Chances are the price action in the spot market for gold is likely to remain trapped inside a range of $1275 and $1300 across the month as demand for safe-haven assets, increased demand expected from India in the physical market owing to marraige season in the month ahead of expected demand from emerging markets on low price of gold is likely to sustain price action above $1275 handle per ounce. However, a dovish turn out in either Brexit or Sino-U.S. trade talk will immediately push the price above $1300 handle and depending upon further progress gold could likely go back near 2019 high’s but given recent proceedings of major global events, there is very little chance for risk-averse trading and increased safe-haven demand in the month ahead which should keep price action contained within above-mentioned price levels.

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