Price of Gold – Fundamental Forecast, March 28, 2017

Gold futures finished higher, but most of the move came in early in the session. Traders reacted to the sharp break in the U.S. Dollar and the shedding of higher risk assets like stocks. Most of the early buying came from Asia. Asian traders were trying to get the jump on U.S. investors in reaction to the news about the failed health care vote in the U.S. on Friday.

June Comex Gold futures closed the session at $1258.80, up $7.10 or +0.57%.

Early in the session, gold buyers were also driven by the weaker U.S. Dollar. However, a turnaround in U.S. Treasury yields at the mid-session encouraged short-covering by U.S. Dollar traders. This helped put a lid on gold prices.

The buying in gold also dried up after U.S. equity markets because to post a recovery.

In other news, Dallas Federal Reserve Bank President Robert Kaplan said on Monday that he will support further interest rate hikes if the U.S. economy continues to make progress towards its goals of full employment and 2-percent inflation.

Chicago Federal Reserve Bank President Charles Evans added at an event in Madrid that the case for four interest rate hikes in the United States this year is not yet solid and would require a stronger lift in inflation.

Evans also said he saw three rate hikes in 2017 as “plausible”, but added that two or four increases were also a possibility.

Forecast

Technical and fundamental factors could pressure gold prices on Tuesday.

Technically, the market is running into resistance at a major 50% level at $1260.70. This price essentially stopped the rally on Monday. If buyers can overcome this level then it should strengthen enough to challenge the main top at $1268.10.

A breakout over $1268.10 will reaffirm the uptrend with the next major target coming in at $1291.50.

Fundamentally, investors are going to continue to react to any news regarding tax reform and infrastructure spending. Gold will react negatively to a firmer Treasury yields, a rebound in the U.S. Dollar and a turnaround in U.S. equities.