Gold Monthly Forecast – November 2017

The gold market saw some pretty tight trading during the course of last month but the overall direction was lower, as we had been pointing out repeatedly in many of our daily forecasts during the month. This was in contrast to the large moves that were witnessed in the gold market in the month before that which were mainly brought about by the tension and the uncertainty in the Korean region. We had warned our traders that the bullishness in the gold market was based on very thin fundamentals and hence likely to reverse anytime.

Gold Prices Under Pressure

The thin fundamentals that we have been talking about involves the rise in risk in various parts of the world depending on the situation there. The Korean region had brought in uncertainty in the previous month and the gold prices had been buoyant due to that reason. The gold bull run was not driven by an increase in demand and neither was it driven by the weakness in the dollar. The run had been driven purely based on the risk events and it was clear that once the risk events dried up, the gold prices would be brought back down to Earth.

This happened during the month of October as the lack of risk events during this month exposed the gold market to the fundamentals of demand and supply and also the strength of the dollar. The dollar remained steady most of the month as the incoming data was choppy to steady from the US. The demand also did not see any major rise and due to this, we saw the gold prices steadily fall during the course of the month. The dollar picked up some strength late in the month and this led to further weakening in the gold prices and we saw the prices fall from above 1300 to below 1270 during the course of the month.

We continue to believe that the gold prices are in for some more downtrend in the coming month of November and in the medium term as well. As we had mentioned in many of our daily forecasts, we believe that globally, we are beginning a cycle of strength in the stock markets and interest rates. This is evident from the fact that many of the major central banks around the world are now looking to stop their rate cut cycle and after a period of no hikes, have now begun a period of rate hikes. This is likely to keep the stock markets and the bond market pretty strong in the respective countries in the medium term.

Gold Prices Likely to Continue Lower

We are already seeing many of the large central banks like the Fed and the BOC hiking rates and other like the BOE looking to do the same and this will lead to the interest rates being attractive for the investors again. This would in turn lead to the flow of funds from the gold markets and other markets that are considered as safe havens into the stock markets and also the bond and interest markets in the medium term. This flow of funds would lead to a drop in the prices of gold during this period.

It is due to the above reason that we expect the gold prices to get weaker in November. We also expect the dollar to gain in strength during this period as the market is looking forward to a rate hike from the Fed in December. The incoming data from the US has been getting slightly better of late and this has been enough for the market to start pricing in the rate hike though the Fed members have not said anything to that effect as yet. Also, the incoming data is not yet as strong as to make a rate hike in December a formality. But, we believe that the data from the US in the first week of December would more or less determine whether a rate hike in December is on or not and if the data comes in strong, then the dollar should get stronger and this will in turn weaken the gold prices even further. This could lead the gold prices below 1250 in the upcoming month.