Price of Gold Fundamental Daily Forecast – Oversold Conditions Could Lead to Light Short-Covering

Gold futures are trading a little better early Monday, mirroring the price action in the U.S. Dollar. There has been no follow-through to the downside following Friday’s steep sell-off and the market seems to be finding some light buying slightly above a four-month low hit last week.

At 0814 GMT, February Comex Gold futures are trading $1250.90, up $2.50 or 0.20%.

Traders are being a little cautious ahead of Wednesday’s U.S. Federal Reserve interest rate decision. The central bank is widely expected to raise its benchmark interest rate 0.25% to 1.50%, however, there are concerns over the number of rate hikes in 2018. This week’s consumer inflation data could determine whether the Fed will stick with it earlier forecast of three rate hikes next year, or reduce the number to two.

In other news, hedge funds and money managers sharply reduced their net long positions in COMEX gold and silver contracts in the week to December 5, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.

Forecast

Oversold conditions could help underpin gold prices today, but this will only lead to short-covering. I don’t expect to see any real buying despite the relatively cheap prices. Rising rates, increasing demand for higher risk assets and competition from Bitcoin should continue to keep a lid on the market.

There are still some concerns over U.S. tax reform becoming law in a timely manner which may provide some support. According to support, Republican U.S. Senator Susan Collins, whose support was crucial in passing the Senate tax reform bill earlier this month, said on Sunday she has not yet decided whether she will back the final measure negotiated by House and Senate leaders.

Later in the month, the issue over a government shutdown will be raised again if a longer-term solution isn’t reached in a timely manner.

Last week’s decision by President Trump to recognize Jerusalem as the capital of Israel could drive gold prices higher if the violence caused by the move continues to escalate.

Another issue remains North Korea. The U.S., Japan and South Korea announced they will hold two days of missile tracking drills starting on Monday, Japan’s Maritime Self-Defense Force said.

Today is a light news day. The JOLTS Job Openings report is expected to come in nearly unchanged at 6.03 million. Later in the day, the Treasury will hold a 10-year Bond Auction.