Price of Gold Fundamental Daily Forecast – Stock Market Weakness Could Drive Gold Higher

The weaker U.S. Dollar helped boost gold futures on Monday. Early Tuesday, gold is edging higher, moving lockstep with the U.S. Dollar. Although gold investors are optimistic that the tax bill would pass, there is still doubt surrounding its impact on the U.S. economy.

On Tuesday, February Comex Gold futures settled at $1265.50, up $8.00 or +0.64%. At 0942 GMT, the precious metals is trading $1266.40, up $0.90 or +0.07%.

Gold is facing several headwinds at this time, which could limit gains, including record equity prices, demand for bitcoin and rising U.S. Treasury yields.

Forecast

Technical factors as well as the weaker dollar are helping to support gold. I also suspect some end-of-the-year house cleaning is taking place. Oversold conditions come to mind also. I don’t mean a technical oscillator when I say oversold. I mean short-sellers disappeared, allowing the buyers to take control. The buyers could’ve been profit-takers or aggressive counter-trend buyers.

The daily chart indicates that gold traders are trying to take the market back to a short-term technical retracement area at $1272.30 to $1278.50. A longer-term 50% level also comes in at $1270.90. Since the main trend is down, I expect to see sellers show up on a test of this area.

Fundamentally, I’m going to make a pretty broad statement. Gold will remain underpinned if stock prices retreat, Treasury yields fall and the U.S. Dollar weakens. Stocks may be vulnerable to a profit-taking sell-off after the tax reform bill is approved or signed into law. It is currently posting a classic “buy the rumor, sell the fact” chart pattern.

Later today, investors will get the opportunity to react to the following reports:  U.S. Building Permits are expected to come in a 1.27 million units, below the previously reported 1.32 million units. The Current Account balance is forecast to drop to -116 billion and Housing Starts are expected to drop from 1.29 million units to 1.25 million units.

FOMC Member Kashkari is expected to give a speech. He is a noted dove and voted against a rate hike at the last meeting. Gold prices could rally if he delivers a speech on why the Fed should refrain from raising rates, or he presents an argument as to why inflation is likely to remain muted.