Price of Gold Fundamental Daily Forecast – Market Testing Value Zone; Overdue for Short-covering Rally

Gold futures finished slightly better on Thursday after hitting a six-week low. The market was supported by a weaker U.S. Dollar, but remained on track to post its biggest monthly loss this year. The market is also in a position to post its third straight weekly decline, but should be able to finish higher for the quarter.

December Comex gold settled at $1289.10, up $1.30 or +0.10%.

The U.S. Dollar closed lower against a basket of currencies for the first time in three days, ending this week’s winning streak. Traders blamed the weakness on end-of-the-quarter position-squaring and profit-taking.

Some investors said the Greenback was overextended, driven higher primarily this week by hawkish remarks from Fed Chair Janet Yellen and steep, politically driven selling in the Euro. The Trump Administration’s release of its long-awaited tax reform plan also helped underpin the index, but the lack of follow-through to the upside after an upbeat Final GDP report may have been the catalyst for the start of the selling on Thursday.

Other investors also said that gold may have been oversold for the same reasons.

In U.S. economic news, the final read on U.S. second-quarter gross domestic product showed a 3.1 percent increase. Traders were looking for a 3.0 percent increase. Traders said there was little reaction to the news because the results are dated. They have already moved on to the third quarter GDP which could come in lower because of the impact of Hurricanes Harvey and Irma on the U.S. economy.

In other news, Weekly Unemployment Claims came in at 272K, higher than the 269K forecast and 260K previous read.  The Goods Trade Balance improved to -62.9 billion, better than the -65.0 billion forecast. Preliminary Wholesale Inventories came in at 1.0%, worse than the 0.4% estimate.

Forecast

Position-squaring, profit-taking and short-covering may be the theme today as investors prepare for the end of the week, the end of the month and the end of the quarter.

Gold is going to begin the fourth quarter on the weak side because of the increasing chances of a Fed rate hike in December.

Rising rates makes us bearish on gold, but we are well aware of North Korea so we have an exit strategy if conditions force us to bailout. You should have one too because if the situation escalates, the investment world will all have the same idea.

Gold is currently testing a major retracement zone at $1286.80 to $1268.90. This may also be a value zone to some investors. A sustained move over $1286.80 will indicate that buyers are coming in to support the market. However, gains are likely to be limited.

The U.S. will release a slew of economic data today but nothing on the major side of the equation. Nonetheless, investors will get the opportunity to react to the Core PCE Price Index, Personal Spending, Personal Income and Consumer Sentiment.

Minor reports include Chicago PMI and Inflation Expectations. Federal Open Market Committee Member Patrick Harker is also scheduled to speak.

The chart pattern should play a major role in today’s price action. The trigger point for a potential upside breakout today is $1291.60.