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Price of Gold Fundamental Daily Forecast – U.S. Producer Inflation Data Will Influence Price Action

The early price action indicates that gold will continue to be influenced by the movement in the U.S. Dollar. The dollar will weaken and gold will strengthen if investors continue to bet that the U.S. Federal Reserve will pause its tightening cycle sooner than expected.
James Hyerczyk
Gold Chart
Gold Chart

Gold futures are trading higher on Tuesday in reaction to a weaker U.S. Dollar. Yesterday, the market posted a dramatic closing price reversal top. However, there was no follow-through to the downside so the chart pattern has not been confirmed. Taking out yesterday’s high will negate the chart pattern.

A trade through $1246.90 will confirm the potentially bearish chart pattern. It won’t signal a change in trend, but it will indicate the selling is greater than the buying at current price levels. It also often leads to the start of a 2 to 3 day correction or a 50% retracement of the last rally.

At 1037 GMT, February Comex Gold is trading $1253.40, up $4.00 or +0.33%.

Although U.S. Treasury yields are moving higher early Tuesday, the dollar is weakening. This may be because investors are looking beyond the short-term movement and at next week’s U.S. Federal Reserve meeting.

On December 18-19, the Fed will meet to discuss monetary policy. Gold traders will be looking for clues on future rate hikes. Gold spiked higher on Monday as speculators bet on the central bank taking a pause after next week’s widely expected rate hike.

In other news, hedge funds and money managers trimmed their net short positions in Comex gold and silver contracts in the week to December 4, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday.

Forecast

The early price action indicates that gold will continue to be influenced by the movement in the U.S. Dollar. The dollar will weaken and gold will strengthen if investors continue to bet that the U.S. Federal Reserve will pause its tightening cycle sooner than expected.

Traders will also be watching the movement in Treasury yields. Yesterday, the 10-year Treasury note yield hit a three-month low, driven by dovish comments from Fed officials and soft U.S. economic data. On Monday, the JOLTS Job Openings report came in lower than expected at 7.08M.

Early Tuesday, the NFIB Small Business Index came in at 104.8. This missed the 107.3 forecast.

Later today, the U.S. Producer Price Index will be released at 1330 GMT. It is expected to come in flat, down from 0.6%. Falling crude oil prices are going to be blamed for the drop. Core PPI is expected to have risen 0.1%, down from 0.5%.

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