Price of Gold Fundamental Daily Forecast – Rangebound, but Likely to Finish Higher for Month

Gold prices are trading lower early Thursday, pressured by strong U.S. growth data and Fed Chair Janet Yellen’s upbeat view of the economy. Nonetheless, the precious metals remains in a position to close higher for the month. On October 31, the February Comex Gold futures contract settled at $1274.70. It is currently trading at $1283.90.

Despite the expected monthly gain, the price action over the last two months can best be described as rangebound with the market essentially straddling the mid-point of its October $1267.00 to $1312.70 range, most of the month. This price is $1289.90.

Traders are saying the price action suggests the lack of conviction from investors in either direction is helping to hold the gold market in a range.

On the upside, gains are being limited because of rising Treasury yields, expectations of a December Fed rate hike and increasing demand for higher-yielding assets.

On the downside, the market has been underpinned by a somewhat weaker dollar because of concerns over future Fed rate hikes in 2018 as well as geopolitical tension over North Korea and the Middle East.

In other news, on Wednesday, the U.S. reported that quarterly GDP came in at 3.3%. This matched the forecast, but was better than the 3.0% previous read. Gold investors read this as a sign that the economy is improving which would likely lead to further rate hikes by the Fed. Higher rates tend to boost the U.S. Dollar which makes dollar-denominated gold a less-attractive investment.

On Thursday, investors will get the opportunity to react to the latest U.S. Core PCE Price Index which is expected to come in at 0.2%. This will be slightly better than the previous 0.1% read.

Personal Spending is expected to rise 0.2%, below the previous read of 1.0%. Personal Income is expected to rise 0.3%, but below the previous 0.4% read.

Weekly Unemployment Claims are expected to rise from 239K to 241K. Chicago PMI is forecast at 62.2.

Short-term, gold gains should be limited because of rising interest rates and equity prices. The downside could also be limited because of lingering concerns over North Korea and a possible military response from the U.S.

Other issues that could prove to be supportive over the next 7 to 10 days if problems arise are U.S. tax reform and a possible government shutdown.

I still contend that gold will not have an extended rally unless U.S. equity indexes break sharply. In the meantime, continue to trade the range until proven wrong but a sustained breakout in either direction.