Price of Gold Fundamental Daily Forecast – Traders Expecting Producer Inflation to Increase

Gold fell to its lowest level in more than a week on Tuesday as reduced concerns over North Korea and the minimal impact of Hurricane Irma drove investors into equities. A steady dollar and firm Treasury yields also made gold a less-attractive investment.

December Comex Gold futures settled the session at $1332.70, down $3.00 or +1.73%.

Gold traders also shifted their focus on U.S. inflation reports later this week and their potential impact on Federal Reserve policy. The Fed meets next week to discuss the direction of interest rates.

Forecast

December Comex Gold futures are trading higher early Wednesday in reaction to lower equity markets and tough talk regarding North Korea from President Trump.

At 0737 GMT, the futures contract is trading $1336.10, up $3.40 or +0.26%.

This week’s price action has been driving by a sharp rebound in U.S. Treasury yields and a strong surge in demand for higher-risk assets like stocks. What took gold lower is also likely to take the market higher so traders have to pay close attention to these two asset sectors.

If traders continue to focus on what’s driving long-term returns in the stock market then gold should remain under pressure. If the shift goes back to safe-haven assets then gold will rally.

This week’s key event in U.S. inflation data. On Wednesday, traders will get the chance to react to the latest on Producer Inflation. It is expected to bounce back from 0.1% last month to 0.3%. Core PPI is expected to come in at 0.2%, up from -0.1%.

Traders will also be watching the 30-year Bond auction especially due to the volatility in the Treasury markets this week. Yields are expected to come in at 2.82 percent. A higher yield could be bearish for gold.

Stronger producer inflation data will not mean the Fed can build a case for raising rates, but it could at least drive up speculation that they will. This will lead to further weakness in gold. If the PPI data is week then look for gold prices to firm.

Even with weak PPI data, gold’s upside will continue to be limited if stocks continue to rally.

The best scenario for gold bulls will be lower Treasury yields and a drop in stock prices.

Of course, North Korea remains a wildcard, but right now it seems risks are subsiding.