Price of Gold Fundamental Daily Forecast – Has Room to Rally, but Dollar Needs to Plunge

Gold futures are trading slightly lower after giving up earlier gains that drove the market to its highest level since July 17. The early strength was fueled by follow-through buying related to Friday’s weaker-than-expected U.S. Nonfarm Payrolls report. The jobs report garnered mixed reviews with some traders describing it as “so-so”. It probably wasn’t weak enough to stop the Fed from raising rates at next week’s December meeting. However, it did fuel speculation that the Federal Reserve may stop raising interest rates sooner than expected.

At 0846 GMT, February Comex gold is trading $1252.30, down $0.40 or -0.02%.

Besides the disappointing jobs data, gold was also underpinned by a report from the Wall Street Journal which said the central bank may adopt a “wait-and-see” approach to future rate hikes. This means the Fed’s future decisions are likely to be more “data-dependent”.

Gold is also being supported by worries over slowing growth and fears that renewed tensions between the United States and China could repress chances of a trade deal.

In other news, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.20 percent to 759.73 tonnes on Friday.

Forecast

Gold traders are likely to take their cues from the movement in the U.S. Dollar, U.S. Treasury yields and the stock market on Monday since the economic data is limited to the JOLTS Job Openings report.

The most bullish scenario for gold will be a weaker U.S. Dollar, another drop in Treasury yields and continued weakness and volatility in the U.S. equity markets.

Earlier today, Japan released a report that indicated a further weakening in its economy. Japan, the world’s third biggest economy, on Monday, revised its third quarter GDP growth down to an annualized rate of -2.5 percent, down from the initial estimate of -1.2 percent.

If gold pullbacks and the fundamentals remain the same, it will likely be because of position-squaring ahead of U.S. inflation data later this week.