Price of Gold Fundamental Daily Forecast – No Crash, Just Testing Major Value Area

A stronger U.S. Dollar drove gold prices to a three month low on Thursday. Traders were reacting to yesterday’s hawkish Fed announcements which included an interest rate hike, leaving its interest rate forecast unchanged and unveiling its plan to reduce its portfolio, which is another form of tightening monetary policy.

August Comex Gold futures finished the session at $1254.60, down $21.30 or -1.67%.

Forecast

Should we be worried about gold? No. It is doing nothing out of the ordinary. It didn’t “crash” on Thursday like some analysts said. Over the past month, it has been one of the most orderly markets out there. It has been reacting to Fed decisions, the movement in the Treasurys and the turns in the U.S. Dollar as expected.

It rallied in early June into $1298.80 when there were still doubts over a June Fed rate hike and it broke from this top when the U.S. Non-Farm Payrolls report showed the labor market was strong enough to handle another rate hike.

It May 9 bottom at $1217.80 was formed shortly after President Trump fired former FBI director James Comey.

It was there during the French elections. It was available during each missile launch by North Korea, the attack on Syria, and the terrorist attacks in the U.K.

In my opinion, it’s just been easier to lay the risk in the market on the Japanese Yen. Whatever event takes place that forces investors into safe haven assets, it is going to have to be powerful enough to saturate the Japanese Yen and force investors to buy gold.

With the U.S. stock markets showing signs of a short-term top and the wagons starting to circle the Trump administration, gold may once again have its day in the sun, but investors are playing the market smart at this time. It appears they are content with letting it break into a value zone rather than chasing it higher.

Based on the aforementioned $1217.80 to $1298.80, a key retracement area has been formed at $1258.30 to $1248.70. Pulling back into a 50% to 61.8% area is normal. There was no panic selling. There was no crash.

Bullish traders may find this area attractive especially if they missed the bottom in May and didn’t want to buy strength in June.

Watch the price action and read the order flow inside $1258.30 to $1248.70. Let’s see if enough buying comes in to form a support base. The price is right for a buy, but this market needs a story to drive it higher. I think that story may be provided by a sharp break in the equities markets. Stocks have to break hard enough to encourage investors to stop buying on the dips and to move money into gold. When this occurs, gold will rally.