Price of Gold Fundamental Daily Forecast – Light Pre-Holiday Volume, Profit-Taking Weighing on Prices

Gold futures are inching lower early Monday on low volume, following Friday’s strong surge. Traders are attributing the low volume to the lack of fresh economic data and the U.S. holiday-shortened week. Profit-taking is also weighing on the market after prices rose four-consecutive sessions last week. Underpinning the market is a weaker U.S. Dollar and concerns over an easing of inflation as well as the Fed’s concerns over a weakening U.S. economy.

At 0955 GMT, December Comex Gold is trading $1220.40, down $2.60 or -0.20%.

Gold prices rose last week as Treasury yields dipped amid concerns over slowing inflation and the Fed’s softening tone about economic growth. Traders were primarily reacting to the October consumer inflation report and somewhat dovish comments from Fed Chairman Jerome Powell and Fed Vice-Chairman Richard Clarida.

In the U.S., a report on consumer prices showed inflation rising as much as forecast on a month over month basis. Traders are concerned, however, that plunging crude oil and gasoline prices could lead to lower inflation. This could weaken the dollar while strengthening demand for dollar-denominated gold.

Federal Reserve Chairman Jerome Powell expressed confidence in U.S. economic strength, but added during a question-and-answer session that the global economy is not growing at the same pace it was last year. He described the global picture as a “gradual chipping away” at the pace of growth but said it is “not a terrible slowdown.”

Atlanta Fed President Raphael Bostic, in a speech delivered in Barcelona, said that the federal funds rate is “not too far” from neutral.

Federal Reserve Vice-Chair Richard Clarida said the central back is close to the point of being “neutral” on interest rates and should predicate further increases on economic data. “Neutral” is the point where Fed policy is neither restrictive nor stimulative.

Forecast

There are no major U.S. economic releases on Monday. The NAHB Housing Market Index is expected to come in at 67, slightly below the previously reported 68. It is essentially a survey of about 900 home builders which asks respondents to rate the relative level of current and future single-family home sales. Above 50 indicates a favorable outlook on home sales.

FOMC Member John Williams is scheduled to speak. Traders will be looking for comments which support a possible slowing global economy.

The theme ahead of next month’s Fed meeting is likely to surround easing inflation and slower growth. This is important because they could encourage the Fed to reduce the pace of rate hikes next year. A December rate hike is about 80 percent certain according to reports.