Price of Gold Fundamental Daily Forecast – Stronger Dollar, Shift in Momentum Pressuring Prices

Gold futures are trading lower early Thursday in reaction to a stronger U.S. Dollar. The catalysts behind the price action are stronger-than-expected U.S. economic data and the breach of a key technical level.

At 0821 GMT, February Comex Gold futures are trading $1329.30, down $9.90 or -0.74%.

Technically, gold crossed to the weak side of a key support trend line that had been guiding the market higher for 23 sessions. Earlier today, sellers drove the market to its second-consecutive lower-low for the first time since early December. This price action made $1345.00 a new main top.

If a range forms between the December bottom at $1238.30 and the January top at $1345.00, we could be looking at the start of a near-term correction back to $1291.70 to $1279.10.

In other news, the U.S. Dollar was supported on Wednesday following the report of better-than-expected capacity utilization and industrial production data. The Capacity Utilization Rate came in at 77.9%, beating the 77.3% estimate. Industrial Production rose 0.9%. The forecast was for a 0.4% increase.

Forecast

The trend is up, but momentum is shifting to the downside, according to the technical chart pattern. The market will have to overcome $1335.00 in order to put it back into a bullish position. We may not see a change in trend to down, but we could see a meaningful correction into a value area identified as $1291.70 to $1279.10.

Economic data that could support a higher dollar will be at the forefront on Thursday.

Building Permits are expected to come in at 1.29 million units versus a 1.30 million unit estimate. Housing Starts are forecast at 1.28 million units. The estimate is 1.30 million units.

The Philly Fed Manufacturing Index is forecast to decline slightly from 26.2 to 24.9. Weekly unemployment claims are expected to drop from 261K to 250K.

The direction of the gold market is now in the hands of the U.S. Dollar. If its short-covering rally continues because of strong economic data then traders are likely to continue to book profits in the gold market. This could eventually lead to a normal break into a key value area.