Price of Gold Fundamental Daily Forecast – Weaker Euro Boosting Dollar, Pressuring Gold

A stronger U.S. Dollar is helping to pressure gold prices early Monday. The dollar is being primarily underpinned by a weaker Euro. This is helping to drag the Greenback higher against a basket of currencies. Gold traders are not reacting much to the weaker U.S. stock indexes.

At 0742 GMT, December Comex Gold futures are trading at $1291.30, down $5.10 or -0.39%.

The dollar rose early Monday in response to a weaker Euro which was driven lower by a report that German Chancellor Angela Merkel’s efforts to form a three-way coalition government failed, raising concerns over political uncertainty in the Euro Zone’s largest economy.

In other news, hedge funds and money managers raised their net long positions in COMEX gold and silver contracts in the week to November 14, government data showed on Friday.

Forecast

Technically, gold’s price pattern improved dramatically on Friday, but the lack of follow-through early Monday suggests that buyers have more work to do before this market turns bullish. The price action also indicates that Friday’s rally may have been fueled by short-covering rather than new buying and that a pullback into support may be necessary to attract fresh buying.

Fundamentally, gold’s upside may be limited because of rising expectations of a Fed rate hike in December.

Over the short-run, we may continue to see short-covering rallies because of concerns over the progress that the U.S. tax bill makes in the Senate. If efforts to pass it prove to be fruitless, we could see a much sharper correction in the U.S. stock market which would generate another buying spree in gold.

This week is a holiday week in the U.S. so trading volume could be a problem. Low volume doesn’t have to equal low volatility, but if it does, gold will remain rangebound this week. Additionally, there is not expected to be any talks on tax reform until next week.

Basically gold buyers are going to have to be willing to buy strength to extend the rally over last week’s high at $1297.50.

If they fail to come in to support a breakout rally then we could see a move back into a short-term technical retracement zone at $1283.60 to $1280.30.