Price of Gold Fundamental Daily Forecast – Volatility is Coming; Bullish Over $1344.50, Bearish Under $1330.30

Gold futures are swinging with the movement in the U.S. Dollar, first hitting its highest level since September 11 before turning lower for the session.

At 0758 GMT, February Comex Gold is trading $1334.40, down $2.70 or -0.20%.

All the move proves is that the uptrend is strong and that most of the move in gold is dollar-denominated. A simple turnaround in the dollar like we are seeing early Wednesday could break the gold market which has rallied for 23 sessions. Technically, the market is overbought which could lead to profit-taking.

Forecast

Gold’s move early in the session has been fueled by the volatility in the U.S. Dollar and the Euro. If you need help trading gold then these are the two currencies you should be leaning on.

On Tuesday, the dollar posted an inside day against a basket of major currencies. The Euro, which tends to control the direction of the dollar index, posted a similar more. The inside chart pattern typically indicates investor indecision and impending volatility.

The expected volatility returned early Wednesday when the greenback fell to a three-year low against its counterparts. The spike to the downside was fueled by the Euro’s spike to the upside as investors shook of a setback to Chancellor Angela Merkel’s chances of forging a “grand coalition” in Germany.

After the initial move, volatility returned to the gold market as the dollar and Euro reversed direction.

Over the long-run, gold is likely to be underpinned because of expectations of a weaker U.S. Dollar. The Greenback is expected to decline as market participants hold the view that monetary policies are headed for normalization across the globe. This should be supportive for gold prices.

However, over the short-run, the dollar still going to be subject to price swings triggered by geopolitical events. This should lead to a volatile trade in gold and possibly encourage investors to lighten up on the long side.

Technically, gold is currently trading inside a small triangle. On the upside, the trigger point for a breakout is $1344.50. On the downside, the trigger point for a breakdown is $1330.30.

If either of these levels are taken out with rising volume, we should see increased volatility.