Price of Gold Fundamental Daily Forecast – Needs Major Break in Stocks to Fuel Breakout

Gold prices rose to their highest level in almost seven weeks on Monday, boosted by a weaker U.S. Dollar, wavering U.S. economic data, and doubts as to whether the U.S. Federal Reserve will raise interest rates again this year. However, strong demand for higher-yielding assets continue to put a lid on prices.

December Comex gold futures closed at $1273.40, down $1.90 or -0.15%.

Besides the weaker dollar, which plunged after the news of Anthony Scaramucci’s ousting by the President, gold traders also reacted positively to lower Treasury yields, a mixed stock market, political uncertainty over Trump’s ability to implement his economic agenda and increasing worries over the stability in North Korea.

The biggest weight on the market appeared to be the rally by the Dow Jones Industrial Average, which closed at a record high. This move signifies that investors are still pouring cash into the stock market.

The inability to hold on to its early gains also indicates that investors don’t seem to be two worried about the political turmoil in Washington or the increasing instability over the North Korean region.

Forecast

The dollar is weak, relations are strained between the U.S. and Russia, North Korea continues to defy and threaten the U.S, Venezuela is rioting and President Trump can’t seem to be able to work with anyone or implement any of his economic agenda.

Gold is often used as an alternative investment during times of political and financial uncertainty, however, at this time, the buying only seems to be strong enough to underpin the market, but not drive it sharply higher.

Putting a lid on the gold market at this time may be the stock market. All three major indexes are currently hovering near all-time highs. This suggests strong demand for higher yielding, higher risk assets. As long as the cash keeps flowing into stocks and investors aren’t worried about uncertainty and outside events, the rally in gold is likely to be stop and go.

In other words, something major has to happen to drive investors out of stocks in order to fuel a meaningful rally in gold. The market may continue to move higher is spurts like we saw last week, but that type of movement is usually professional buying. In order to fuel a major breakout rally, we’re going to need some major cash flowing into gold from speculative buyers. And this money will have to come from investors aggressively exiting their positions in the stock market.