Price of Gold Fundamental Daily Forecast – Core PCE Miss to Downside Could Be Bullish for Gold

A stronger U.S. Dollar and the lack of excessive volatility in the stock market is helping to pressure gold prices on Monday. Traders also said that profit-taking was behind the move after gold’s rallied stalled on Friday. Investors are also expressing concerns over U.S. corporate earnings and a slowdown in global economic growth.

At 0904 GMT, December Comex Gold is trading $1231.00, down $4.80 or -0.40%.

In other news, hedge funds and money managers cut their net short position in Comex gold by 10, 473 contracts to 26,899 contracts in the week to October 23, the smallest net short position since mid-July, data from the Commodity Futures Trading Commission showed.

As far as the U.S. Dollar is concerned, the greenback moved higher against a basket of currencies on Monday, near its more than two-month high reached on Friday following the release of a stronger-than-expected U.S. GDP report. Safe-haven buying, however, remains the main catalyst behind the rally. As investor demand for risky assets waned this month on steep declines in global equity markets, investors move their money into gold for safety.

The dollar was also helped by a decline in the Euro. The single-currency fell after German Chancellor Angela Merkel’s junior coalition partners gave her conservatives until next year to deliver more policy results.

Forecast

Don’t be fooled by the weak price action early Monday. Gold could recover its losses fairly quickly if there is another steep plunge in the stock market. However, overbought gold and oversold positions in the stock market may be encouraging investors to take profits and cover short positions respectively.

The daily chart indicates that gold could break to $1226.30 then $1222.70 before investors recognize value. However, the chart also indicates that if $1222.70 fails as support, we could see an eventual pullback into $1210.60 to $1204.40.

Later today, investors will get the opportunity to react to the latest data on the Core PCE Price Index. It is forecast at 0.1%. Personal Income is expected to come in at 0.4% and Personal Spending is forecast at 0.4%.

FOMC Member Evans is also expected to give a speech and the Dallas Fed will release its latest manufacturing index data.

Look for extreme pressure on gold if the dollar and the stock market rally. Rising interest rates could also weigh on gold prices.

Gold will continue to be underpinned by stock market volatility and weaker prices.

Watch the Core PCE number at 1230 GMT. This could move the market higher if it comes in weaker than expected. However, a stronger number will solidify the Fed’s plans to raise rates aggressively and this could be bearish for gold.