Price of Gold Fundamental Daily Forecast – Ripe for Reversal Top after Hitting Key Retracement Levels

Gold prices rose to a two-week high on Wednesday while posting its fourth straight session of gains. A weaker U.S. Dollar was a catalyst behind gold’s rally. The Greenback rose initially, following solid home sales, but a drop in mortgage applications drove the dollar to a two-week low, triggering a change in trend to down.

On Wednesday, February Comex Gold futures settled at $1269.60, up $5.40 or +0.43%.

Gold reached a cyclical bottom on December 12 after the U.S. Federal Reserve failed to increase the number of interest rate hikes in 2018 in its last monetary policy statement. It was further supported by a weaker U.S. Dollar and increased demand from China.

In other news, the Republican-led U.S. House of Representatives gave final approval on Wednesday to the biggest overhaul of the U.S. tax code in 30 years, sending a sweeping $1.5 trillion bill to President Donald Trump for his signature.

In other news, U.S. Existing Home Sales increased more than expected in November, hitting their highest level in nearly 11 years, the latest indication that housing was regaining momentum after almost stalling this year.

Forecast

Rising U.S. Treasury yields and strong demand for equities could put a lid on gold’s current rally. The entire seven day rally has been fueled by short-covering and the market is currently testing a key technical retracement zone at $1270.90 to $1278.50 so short-sellers could re-emerge at any time.

At 0837 GMT, February Comex Gold is trading $1268.50, down $1.00 or -0.08%. Earlier in the session, it hit a high of $1271.80.

We’re going to be looking for selling pressure and a lower close today. We won’t be disappointed either way since volume has been well-below average this week ahead of the Christmas and New Year holidays.

Later today, investors will get the opportunity to react to a slew of economic reports including Final GDP, the Philadelphia Fed Manufacturing Index, Weekly Unemployment Claims, the Home Price Index and the Conference Board’s Leading Index.

Quarterly Final GDP is expected to come in unchanged from the previous report at 3.3%. A higher number should be bearish for gold because this will indicate the economy is growing at a faster clip than expected. This could encourage the Fed to increase the frequency of its rate hikes in 2018.