Price of Gold Fundamental Daily Forecast – Pressured by Optimism Over Tax Reform, Demand for Risky Assets

Gold futures tumbled over 1.50% on Monday, giving up all of Friday’s gains on pressure from the rising dollar. The catalysts behind the rally were expectations for a U.S. rate hike in December and perhaps as many as three in 2018. Traders also reacted to a surge in demand for higher-yielding assets.

December Comex Gold futures settled at $1275.30, down $21.20 or -1.64%.

A shift in momentum sent the U.S. Dollar Index to its highest level in nearly a week on Monday. A sell-off in the Euro was mostly behind the move. The single-currency weakened on political risks fueled by German Chancellor Angela Merkel’s failure to form a three-way coalition government.

In the U.S., the only report released on Monday was the Conference Board Leading Index. It gained 1.2% above the forecast of 0.6%.

The weaker Euro and strong economic data helped support the U.S. Dollar. This led to a decrease in foreign demand for dollar-denominated gold.

Gold was also pressured by a surge in the major U.S. stock indexes. They were mostly supported by expectations that tax reform will be completed in a timely manner and the strong CB Leading Index report.

Forecast

Gold prices are rebounding early Tuesday after yesterday’s steep sell-off may have put the market into oversold territory. Traders are also saying that position-squaring ahead of Wednesday’s release of the Fed Minutes may be providing some support.

Traders were also keeping an eye on safe-haven demand for gold after U.S. President Donald Trump put North Korea back on a list of state sponsors of terrorism.

On Tuesday, gold investors are likely to continue to react to the direction in the U.S. Dollar. A bullish dollar will pressure gold. A soft dollar will underpin gold.

The catalysts behind the price action in gold will be Treasury yields and appetite for risky assets. Rising yields and increased demand for higher-yielding assets will be bearish for gold.

On the upside, the key area to overcome for the bullish gold traders is $1280.30 to $1283.60. On the downside, the support is a main bottom at $1269.70.

Volume is expected to remain below average due to the holiday-shortened week. This could help produce volatile swings in the market so be prepared for two-sided trading especially if gold remains inside $1269.70 to $1297.50.