Price of Gold Fundamental Daily Forecast – Consolidating Ahead of PPI Data

Gold prices are inching higher on Thursday shortly before the regular session opening. Fundamentally, the market is being supported by lower Treasury yields and some light position-squaring ahead of the release of the U.S. Producer Price Index and other reports.

At 1035 GMT, December Comex Gold is trading $1222.60, up $1.60 or +0.13%.

Gold traders are also keeping an eye on the U.S. Dollar which has been the primary driver of its price action lately. A strong U.S. Dollar will weigh on gold’s upside momentum.

This week’s U.S. inflation data on Thursday and Friday could determine where gold settles the week. Expectations of faster rate hikes and higher inflation will continue to keep a lid on gold prices and could even push it lower.

Supporting the idea of higher rates and lower gold prices on Wednesday were comments from Richmond Fed President Thomas Barkin who said the U.S. economy is strong enough to warrant further interest rate increases by the central bank.

Longer-term, the Fed is expected to make at least two more rate hikes this year after already raising its benchmark interest rates two times so far this year. The Fed is likely to stay this course unless a trade war slows the economy enough to warrant a change in policy by the central bank.

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Forecast

Today, gold investors will get the opportunity to react to a few U.S. economic reports. At 1230 GMT, the Producer Price Index is expected to come in at 0.2%, down from 0.3%. Core PPI is also expected to post similar results.

Weekly Unemployment Claims are forecast at 220K, up a little from 218K. Final Wholesale Inventories are expected to stay flat at 0.0%.

Technically, hedge fund and money managers are net short gold which makes the market vulnerable to a short-covering rally. The near-term range is $1244.70 to $1212.50. Its 50% level or pivot is $1228.60. This level is resistance at this time. However, overcoming this level could change momentum to up and indicate a shift in investor sentiment.

Watch the price action and read the order flow on a test of $1228.60 today. Trader reaction to this level should determine the direction of the market today.