Price of Gold Fundamental Daily Forecast – Yellen’s Hawkish Comments Could Pressure Gold

Gold is trading mostly flat on Monday after early session weakness. Sellers are reacting to a firmer U.S. Dollar and increased demand for higher-yielding assets. Buyers are supporting the market after Friday’s weaker-than-expected U.S. inflation print helped push Treasury yields lower. Traders are also underpinning the market in reaction to the news that U.S. President Trump might ultimately end a 2015 nuclear agreement with Iran.

At 0531 GMT, December Comex Gold is trading $1304.70, up $0.10 or +0.01%.

In other news, according to the U.S. Commodity Futures Trading Commission, speculators cut their net long position in COMEX gold contracts for a fourth straight week to October 10. This means that recent rally was fueled primarily by short-covering and not new buying which is a potentially bearish development.

Forecast

Although there were some new geopolitical developments over the week-end, the price action today is likely to be driven by comments made by Fed Chair Janet Yellen over the week-end.

Yellen said on Sunday the U.S. economy remains strong and the strength of the labor market calls for continued gradual increases in interest rates despite subdued inflation.

Speaking at an international banking seminar, Yellen acknowledged that the persistence of undesirably low inflation this year has been a surprise. But she said she expected to start picking up as the effects of temporary factors, such as falling prices for consumer cellphone service, begin to fade.

“Economic activity in the United States has been growing moderately so far this year, and the labor market has continued to strengthen,” Yellen said.

Yellen’s comments may be strong enough to drive up U.S. Treasury yields which should make the U.S. Dollar a more attractive investment. A firmer Greenback could drive dollar-denominated gold lower because of a drop in foreign demand.

We’ll know the impact of Yellen’s comments on the gold market later today when we see trader reaction in the Fed Funds market. If the odds of a December rate hike increase to over 90 percent then last Friday’s gains fueled by the weaker-than-expected consumer inflation data could be erased.