Gold Monthly Forecast – May 2018

Gold markets have continued to range over the last month or so and this only continues the tradition and the trend that has been going on since the beginning of the year. During this period, the gold prices have failed to breach through either side of the large range that the market seems to be trading in at this point of time and though there have been several attempts to break through either side of the range, they have largely been beaten back by the buyers and the sellers on either side and this has forced the prices back into range.

Gold Prices Range

Prices have been caught in the large range between the $1300 and the $1360 regions and over the course of the month of April, we saw the prices move towards the $1360 region on the back of some sustained dollar weakness. The incoming data was not as good as the market was expecting and there were also many risks on the horizon based on the supposed trade wars between the US and China and also due to the actual war that has been happening in Syria. The US also seemed to join the war and this increased the global risk which led to the flow of funds into the gold markets.

This, in turn, led the prices to shoot higher as the demand picked up over the first half of last month. But the US intervention in the war seemed to be limited to the launch of a few missiles as there was no follow up action beyond this point and this seemed to settle the nerves of the market. Towards the end of the month, we also saw the 2 Korean leaders coming together for meetups and this has held out some hope for peace in the region over the short and medium term. This reduced the global risk which once again saw the funds flowing from the gold market back into the stock markets and other risky assets which saw the prices fall and close the month very close to their range lows. This action is expected to continue in the coming month of May.

Gold Forecast

The focus would be on the dollar in the coming month as the markets would expect the dollar to continue moving from strength to strength. That has been happening towards the end of last month and the market would hope that it continues. Another thing that the market would hope would happen is the economic data to help their anticipation. The incoming data from the US over the last few weeks have slipped the expected standards, including the employment report, and the investors and traders would be hoping that the US economy and data gets back on track in the coming month.

This would help them to continue to build their anticipation for at least 2 more rate hikes during the course of the rest of the year. On the other hand, the small part of the market expects that the Fed would be tempted to hike for 3 more times but for that as well, it is important that the incoming data support such a move. At this point in time, the possibility of that happening is pretty less. With all that being said, it is difficult to see what would be needed to help the gold prices to break the range that it is currently in as the periods of strength and the weakness in the dollar and in the market, in general, have been dealt with quite deftly by the gold traders and the traders have not been able to generate enough traction or momentum for a breakout in either direction. Only a breakout is likely to bring in volatility and liquidity in the direction of the breakout.