Price of Gold Fundamental Daily Forecast – Lack of Fresh News Creating Short-covering Opportunities

Gold prices reversed to close slightly higher on Monday after early session weakness drove the market into its lowest level since October 6. Initially, the market was under pressure due to rising Treasury yields, a firmer U.S. Dollar and increased appetite for risk.

On Monday, December Comex Gold futures settled at $1280.90, up $0.40 or +0.03%.

At 0642 GMT, Gold is trading $1282.70, up $1.80 or +0.13%.

A sharp break in U.S. equity markets late in the session sent investors into the safety of gold. Oversold technical factors also factored into the short-covering rally.

There were no major economic releases on Monday, but investors continue to watch for developments over U.S. tax reform and President Trump’s selection for Fed Chair.

Trump said on Monday he is “very, very close” to making his decision on who should chair the Fed and was considering at least three people:  Federal Reserve Governor Jerome Powell, Stanford University economist John Taylor and current Fed Chair Janet Yellen.

Gold could be pressured further if Trump appoints a hawkish Fed Chair. A dovish Fed Chair could trigger a short-covering rally, but is not likely to change the trend to up.

Forecast

Gold traders are likely to continue to monitor the price action in the stock market since this seems to be the primary catalyst at this time. Gold will be supported if the selling pressure on stocks continue. Gains are likely to be limited because of rising expectations for a Fed rate hike later this year.

It’s another light day as far as economic reports are concerned. On tap today is Flash Manufacturing PMI which is expected to come in nearly unchanged at 53.3. Flash Services PMI is also expected to show a marginal gain at 55.2. The Richmond Manufacturing Index is expected to decline slightly to 17 from a previous read of 19.

In the absence of major economic reports until later in the week, gold traders are going to be more sensitive to outside influences. This could produce a choppy, two-sided trade.

Longer-term, gold is bearish because of rising interest rates, the stronger U.S. Dollar and appetite for risk. Short-term, the market is likely to remain sensitive to any news about North Korea. These short-term counter-trend reactions are likely to create additional shorting opportunities.