Price of Gold – Fundamental Forecast, Week of May 1, 2017

Gold futures gapped lower at the start of the week and the market never looked back amid increased demand for higher-yielding assets.

June Comex Gold futures closed the week at $1268.30, down $20.80 or -1.61%.

Gold started the week by falling to a two-week low on Monday after the results of France’s presidential election first-round vote calmed the nerves of investors.

After the initial drop, prices consolidated the rest of the week as investors reacted to the weaker U.S. Dollar, continued geopolitical concerns, uncertainty over Trump policy and worries about a possible U.S. government shutdown.

Gold was also pressured by a sharp rise in U.S. equity markets, which rose as corporate earnings showed sustained improvement.

Prices reversed from early weakness last Wednesday after the White House unveiled plans for tax reform. President Trump called for deep reductions in business tax rates and major changes to the individual tax system. However, the news failed to support the U.S. Dollar, driving gold prices higher. Most market participants felt the plan was light on details and could also face resistance from lawmakers.

Forecast

Although the trend is up according to the daily and weekly charts, the market closed in a vulnerable position. Buyers, looking for value, came in to support gold on the break into $1260.70, but the chart indicates that if this price fails this week, prices could drop fairly quickly into a key retracement zone at $1247.70 to $1236.00.

If buyers continue to come in this week then investors will have to make a decision on a rally back to $1279.00 to $1283.40. Aggressive counter-trend traders may come in on a test of this zone in an effort to defend the main top at $1297.40 and produce a potentially bearish secondary lower top. Overtaking the zone will make $1260.70 an important higher bottom.

Fundamentally, bullish traders lost one catalyst last week when Emmanuel Macron and Marine Le Pen finished first and second respectively in the first round of the French elections. Tensions between the U.S. and North Korea also eased during the week.

Based on events over the week-end regarding North Korea, however, I wouldn’t be surprised if gold opened higher on Monday. Prices could continue to rise throughout the week if there is a lingering threat of a military intervention.

Over the week-end, North Korea thumbed its nose at the U.S. when it attempted another missile test that officials say could provoke a military conflict.

The situation over North Korea is likely to be the main story this week as many investors are not likely to take positions ahead of Friday’s U.S. Non-Farm Payrolls report.