Price of Gold Fundamental Daily Forecast – Trump Decision on Iran Likely to Fuel Volatile Reaction

Gold price inched lower on Monday, ending a three day winning streak after the U.S. Dollar hit its highest level against a basket of currencies since December 19.

June Comex Gold futures settled at $1314.70, down $8.70 or -0.66%.

Traders also said the lack of follow-through to the upside in reaction to Friday’s weaker-than-expected U.S. jobs report also weighed on gold prices. Worries that the U.S. Federal Reserve would proceed with its plan to raise interest rates at least two more times in 2018 also encouraged sellers to retake control.

Gold was also pressured by a less-hawkish European Central Bank and a widening interest rate differential between the United States and Europe which increased demand for the U.S. Dollar.

Finally, large gold investors have been slashing long positions in gold according to U.S. Commodity Futures Trading Commission Data. Net long positions on Comex gold contracts fell to their lowest since July 2017.

In other news, there were no major U.S. reports on Monday, but investors did get the opportunity to react to a couple of FOMC Member speakers.

Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank can accommodate an overshoot of its inflation target and he isn’t worried by the impact of oil prices rising past $70 a barrel.

“We’re fluctuating around the 2% target. I am comfortable with that. To the extent we have seen some upward pressure, we don’t have the ability to stop trends on a dime. Some overshoot is fine”, Bostic said.

At his first public speaking appearance since his appointment to the helm of the Federal Reserve of Richmond, Thomas Barkin painted an overwhelmingly positive picture of the economy and made a case for rising interest rates.

Forecast

Gold is tracking slightly higher early Tuesday as investors react to some weakness in the U.S. Dollar. Without any major economic reports on the agenda, the market may become rangebound on light volume ahead of President Trump’s announcement about whether the U.S. walks away from the Iran nuclear deal at 1800 GMT.

Gold could rally if the U.S. Dollar weakens on Trump’s decision. Trump can also push the decision into the future so there is some uncertainty going into the trading session.

Early Tuesday at 0715 GMT, Fed Chair Jerome Powell is scheduled to speak. He could shake up the markets if he drops hints about the timing and frequency of future rate hikes.

Later in the session, investors will get the opportunity to react to data on the NFIB Small Business Index, the JOLTS Job Openings and IBD/TIPP Economic Optimism. These are minor reports so we don’t expect much of a reaction.

The key market driver today will be Trump’s decision on Iran. Look for volatility if Trump decides to pullout of the deal, or if he decides to delay his decision.