Price of Gold Fundamental Daily Forecast – Stronger Dollar, Rising Treasury Yields, Appetite for Risk – Key Market Drivers

Gold prices fell to their lowest level since October 6 on Thursday as the U.S. Dollar posted a strong gain against the Euro after the ECB announced a dovish monetary policy decision. Also pressuring gold was fresh speculation that the next U.S. Federal Reserve Chair could be a policy hawk following reports that current Chair Janet Yellen is out of the running.

December Comex Gold settled at $1269.60, down $9.40 or -0.73%.

Earlier in the week, U.S. President Donald Trump polled Republicans on whether they would prefer Stanford University economist John Taylor or Fed Governor Jerome Powell for the job. More senators preferred Taylor. With Yellen out of the race, the odds have increased that Trump will appoint a hawkish successor to Yellen.

The main driver of the price action on Thursday was the ECB decision. The central bank drove the Euro lower and the U.S. Dollar higher after it issued what investors considered a dovish form of tapering. The strong dollar made gold a less desirable investment.

The ECB news was dovish because the decision was both an extension and a reduction. Furthermore, it pushed any potential rate hikes into 2019.

The ECB extended its bond purchases and reduced the chances that it would hike rates in 2018. The details of its decision revealed that it would prolong its bond buying program by nine months to September 2018, and leave the door open to keep buying after that. It also said it would begin paring its monthly purchases by half to 30 billion Euros ($34.90 billion) starting in January.

ECB chief Mario Draghi said “an ample degree of monetary stimulus remains necessary”, as inflation has yet to show signs of a sustained upward trend.

In other news, U.S. Weekly Jobless Claims came in at 233K, slightly lower than the 235K estimate, but higher than the previous 223K. The Goods Trade Balance was -64.1B. Traders were looking for -63.8 B. Last month’s report came in at -63.3B.

Preliminary Wholesale Inventories rose 0.3%, better than the 0.4% estimate. Pending Home Sales were flat at 0.0%. Traders were looking for a 0.2% increase. The previous month was revised down by 2.8%.

Additionally, the U.S. House of Representatives voted on Thursday to clear a procedural path forward for a Republican tax bill.

Forecast

Gold could continue to feel selling pressure on Friday if the U.S. Dollar resumes its uptrend. Rising U.S. Treasury yields and appetite for risky assets should also be bearish for gold.

On Friday, gold investors will get the opportunity to react to the latest quarterly Advanced GDP data along with the Revised University of Michigan Consumer Sentiment report. Stronger-than-expected readings should put pressure on gold because they will solidify the odds of a Fed rate hike in December.