Price of Gold Fundamental Daily Forecast – Speculators Waiting for U.S. Response to North Korean Missile Launch

Gold eked out a small gain despite the launch of a ballistic missile by North Korea into the Sea of Japan. Gains were limited by increased appetite for risk as U.S. equity markets soared to new all-time highs on optimism over tax reform. The news also drove Treasury yields higher, underpinning the U.S. Dollar which made dollar-denominated gold a less-desirable asset.

February Comex Gold futures settled at $1299.20, up $0.30 or 0.02%.

The economic news was somewhat bearish on Tuesday. The Conference Board Consumer Confidence report. It came in at 129.5, crushing the 123.9 estimate and 126.2 previous month’s read.

U.S. Federal Reserve Chair nominee Jerome Powell testified before the Senate Banking Committee on Tuesday, providing little ammunition for traders by sounding like his predecessor outgoing Fed Chair Janet Yellen.

During his Senate confirmation hearing Tuesday, Powell strongly hinted that the likelihood of a December rate hike is growing, however, he did not commit definitely to it. In his testimony, he also indicated that traders can expect more of the same from the Fed under his leadership, even though there is a new person in charge.

“The case for raising interest rates at our next meeting is coming together,” Powell told the Senate Banking Committee. “I think the conditions are supportive of doing that.”

The Senate Budget Committee advanced the Republican tax bill. Traders are now bracing for a full Senate vote on November 30. Goldman Sachs predicts a 50 percent chance of tax reform is likely this year and an 80 percent chance it gets done in 2018.

The good news on tax reform had the most impact on gold prices since it helped boost demand for higher-yielding assets. It seemed to offset any buying fueled by the North Korean missile launch.

Forecast

Comex Gold futures are trading higher on Wednesday amid a slightly weaker U.S. Dollar. However, there is no evidence that the North Korean news is having a bullish impact on the market. There may be a delayed reaction to the North Korean news because investors are likely waiting to hear or see the U.S. response to the launch of the ballistic missile.

Gold could rally if tensions escalate due to an aggressive response from the U.S. and a similar response from the North Koreans.

Later today, investors will get the opportunity to react to U.S. economic data on Preliminary GDP, Pending Home Sales and the Fed’s Beige Book. FOMC Member William Dudley is also scheduled to speak.

The main market moving event is likely to be the testimony of Fed Chair Janet Yellen. She could move the markets with remarks on monetary policy, interest rates and inflation.

Technically, gold prices are being underpinned according to the chart pattern, but gains have been limited because the buying volume has been below average. In order to trigger a surge into the $1312.70 target, volume has to increase substantially. This is likely to occur if there is a steep sell-off in U.S. equity markets.