Price of Gold Fundamental Daily Forecast – “One-and-Done Move? Or Start of Something Big?

Gold prices are trading lower early Friday after spiking higher yesterday in flight-to-safety buying related to a second day of extreme stock market weakness. The buying was strong enough to take the market to a 10-week high. No traders have to decide it the move was a “one-and-done” even, or if there was enough buying to signal a change in the trend.

At 0957 GMT, December Comex Gold is trading $1223.60, down $4.00 or -0.33%.

If the buying was fueled solely by safe-haven buying then we could settle into a range. If investors genuinely bought gold as an investment then the rally could have some lasting power. Investors just have to decide if gold is a safe-haven asset or an investment. And the only way to do that is to let their money do the talking.

I like the price action in gold. I like the fact that it’s formed a support base, but I do think gold is going to have a hard time sustaining a rally because it can’t compete with Treasury yields at multi-year highs. Gold doesn’t pay a dividend or interest to hold it. Therefore, gains are likely to be limited.

Furthermore, we won’t know until next week if the hedge funds and money managers have covered their net short positions and flipped to a net long position. My best guess is that they reduced positions with today’s move, but a few bears held on.

Based on gold’s reaction to yesterday’s consumer inflation miss, I think the market is going to be very sensitive to economic news moving forward, especially when it pertains to inflation. CPI for September came in at 0.1%, missing the 0.2% forecast. Core CPI posted the same results.

Today, investors will get the opportunity to react to the latest news on consumer sentiment. This data will be considered stale, however, in light of this week’s stock market performance. I don’t think today’s University of Michigan survey will reflect the huge jump in interest rates and the steep drop in stock prices.

Fed members Bostic and Quarles are also scheduled to speak. Traders want to hear what they have to say about the Fed’s role in the stock market volatility.