Price of Gold Fundamental Daily Forecast – Firmer U.S. Dollar Fuels Profit-Taking Sell-Off

Gold prices retreated from a three-week high on Monday, pressured by profit-taking fueled by a firmer U.S. Dollar. However, the selling was limited by speculators defending the psychological $1300.00 level. Ongoing tensions over Iran and North Korea as well as low U.S. inflation have helped support gold throughout the month.

December Comex Gold settled at $1303.00, down $1.60 or -0.12%.

Gold traders reacted negatively to U.S. economic news early in the session.

On Monday, the Federal Reserve Bank of New York said in a news release that the results of the October Empire State Manufacturing Survey indicates that business activity “grew at a robust pace” for New York manufacturers.

The Empire State Manufacturing Survey general business – conditions index rose six points to 30.2 in October, its highest level since 2014.

The index fell less than a point to 24.4 in September after climbing 15 points to 25.2 in August, which, at the time, was its highest level since September 2014.

The positive reading indicates expansion and usually supports U.S. Treasury yields and the U.S. Dollar.

Higher U.S. Treasury yields also put a limit on gold prices on Monday. U.S. government debt yields rose as investors digested the latest comments coming from leading central bankers over the week-end. In spite of muted inflation, Fed Chair Janet Yellen said that the U.S. economy remains robust and the strength of the labor market makes the case for gradual increases in interest rates.

Forecast

Gold prices are down over $10 early Tuesday. The price action indicates that profit-taking could drive the market into a technical support zone at $1285.60 to $1280.20.

Prices are being led lower by heavy selling pressure in Asia. Traders are reacting to a firmer dollar, which is weighing on investor appetite for the dollar-denominated commodity.

On Tuesday, investors will have the opportunity to react to reports on Import Prices, Capacity Utilization, Industrial Production and housing.

Import Prices are expected to show a gain of 0.6%. The Capacity Utilization Rate is expected to come in at 76.2%. Industrial Production is also expected to increase by 0.3%. The NAHB Housing Market Index is expected to come in steady at 64.

Later in the session, the Federal Budget Balance report is expected to come in at -0.9 billion and TIC Long-Term Purchases at 14.3 billion.

Philadelphia Federal Reserve Bank President Patrick Harker is also scheduled to speak. Recently he said that he expects the Fed to hike interest rates in December.