Price of Gold Fundamental Daily Forecast – Market Moving Event Could Be Yellen’s Afternoon Speech

Flight-to-safety buying drove gold prices higher on Monday as investors reacted to reports that North Korea’s Foreign Minister Ri Yong Ho, accused President Trump of declaring war on the rogue nation. Lower demand for higher risk assets like U.S. equities also made gold a more attractive investment.

December Comex Gold futures settled at $1311.50, up $14.00 or +1.08%.

Ri was reacting to American bombers flying in international airspace east of North Korea in a symbolic show of military force on Saturday. He also said that North Korea could target planes even when they are not flying in North Korean airspace.

“The whole world should clearly remember it was the U.S. who first declared war on our country,” he said.

“Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country,” he added.

In other news, Federal Reserve Bank of New York President William Dudley said the U.S. central bank should maintain its gradual pace of policy tightenings as temporary factors holding down price pressures fade. This signaled the Fed remains on track to raise interest rates again in December.

Chicago Fed President Charles Evans offered a more cautious perspective on Monday. Speaking in Grand Rapids, Michigan, Evans said that he was “broadly comfortable” with the median estimate of the Fed’s quarterly projections, which showed its overnight policy rate ending 2019 at 2.7 percent.

Evans also said, “We (the Fed) should avoid taking policy steps that could be misread as a lack of concern over the inflation outlook. In my view, that would be a policy misstep that would further delay achieving our inflation objective.”

Minneapolis Fed President Neel Kashkari said on Monday that he sees no need for the U.S. Federal Reserve to raise interest rates further as he sees no evidence recent weak inflation data is set to improve.

“When I look at the economy I don’t see any signs that the economy is close to overheating,” said Kashkari, a voter on the central bank’s rate-setting committee this year, during an appearance at the University of North Dakota. “I don’t see inflation taking off so I see no need to tap the brakes.”

Forecast

I expect gold to continue to be headline-driven in the short-run with a huge emphasis on any news regarding the on-going conflict with North Korea.

The longer-term picture is potentially bearish because of the Fed’s recent hawkish tone. However, with the exception of its plan to begin reducing its balance sheet, the next rate hike in December is entirely data-dependent. Therefore, gold traders are going to have to continue to monitor key economic reports until then.

On Tuesday, investors will get the opportunity to react to U.S. reports on housing, consumer confidence and manufacturing. FOMC Member Lael Brainard is also scheduled to speak at 1430 GMT.

The major market moving event today is likely to be Fed Chair Janet Yellen’s speech at 1645 GMT. Yellen’s speech is expected to be on “inflation, uncertainty, and monetary policy”. She could create volatility in the gold, Forex, Treasury and stock markets if she mentions anything about the timing of the next Fed rate hike.