Gold Monthly Forecast – May 2017

After posting a strong performance in the month of March when it managed to recover from its lows below 1200 and finished the month strongly above 1240, it had a much slower and consolidating month of April where its range was pretty low as the traders decided to give gold a break and decided to focus on the other pairs and instruments. It has not made much of a progress this month though it did start off the month briskly by basically carrying on from where it left off.

Gold Takes Rest For the Next Move Up

It managed to move as far high as the 1290 region on the back of global fears and uncertainty surrounding the French elections that were to take place in the 3rd week of April. This was considered as a strong risk event as the main 2 contenders were on opposite ends in terms of ideology and their preference for the Euro. While Le Pen was against the euro, her fellow contender Macron was more business and euro friendly. The opinion polls had suggested a victory for Macron but the markets were not ready to believe that just yet based on its experience with Trump and the US polls.

This general fear and uncertainty helped to push the gold prices higher and higher as the investors sought to push their funds into more safer assets like gold and silver and pulled out of stock markets as well. This helped the gold prices to move into the 1290 region but at that time, we had forecasted that the gold prices are likely to have a correction back towards the 1265 region.

Our forecast was based on our analysis that Macron would win the French elections and if he did, then there would be a risk on mood in the markets and the move up in the safe assets like gold would be unwound. This is what happened after the French elections as we saw Macron winning the elections comfortably and also being in prime position to repeat this victory on May 7 when the run off happens between him and Le Pen. This news cheered the markets and helped to bring in a risk on mode into the markets which meant that the funds would now move in the opposite direction. The funds began to flow out of gold and into risky assets like the stocks markets and this has pushed the gold prices lower to close just above support at 1260 at the end of the month.

In the upcoming month, apart from the usual risk events of the FOMC, NFP and ECB decisions, we have the run off for the French President. Of these, the NFP and FOMC are likely to have a strong bearing on the gold prices as the market would now begin to focus on the next rate hike from the US. A part of the market expects a rate hike in June but with Trump saying that he prefers lower interest rates and a weaker dollar, the FOMC statement and the Yellen speeches in May would be watched with interest. The NFP would also be watched keenly to see whether the data continues to be strong which will then force the Fed to hike rates. We believe that the gold prices are likely to consolidate during the early part of the month and then begin to rise to target 1300 during the course of the month.

Technically, the pair has a strong base in the 1260-1265 region and that is why we saw the gold prices correct towards this region during the closing days of the month of April. We believe that the traders would use this region as a launch base to launch the next leg of the bull run in April. The immediate target of such a bull run would be the region between 1295 and 1298 where there is a lot of resistance and which had enough selling in March to repel the gold advance. If and when this is overcome, which we believe will have to happen quickly, then we are likely to see the gold prices move towards the 1320 region as the next immediate target. For the coming month, we believe that this would be the range.