Price of Gold Fundamental Weekly Forecast – Biggest Influence on Prices Will Be Consumer Inflation Data

After consolidating for two weeks, gold futures prices plunged last week amid concerns over rising interest rates and a firmer U.S. Dollar. Investors seemed unfazed by renewed stock market volatility which usually fuels movement into the safe haven gold market.

April Comex Gold futures settled at $1315.70, down $21.60 or -1.62%.

Rising U.S. Treasury yields have been triggering violent responses in the financial markets since the first week in February. A rise in the U.S. 10-year Treasury Note above 2.70 percent to 2.885 percent triggered a massive sell-off in U.S. equity markets.

The increased volatility encouraged investors to shed risky assets and commodities and to seek protection in so-called safe-haven assets. This helped hold up the gold market at times, but not enough to overcome the pressure from forecasts of higher rates.

Rising rates helped drive the U.S. Dollar to nearly a one-month high. This weakened dollar-denominated commodities like gold.

Forecast

Gold traders should continue to monitor the direction of Treasury yields and the U.S. Dollar. The stock market should also be watched closely.

Rising yields and the dollar should make gold a less-desirable asset. A recovery in the stock market could also press gold prices lower.

Technically, April Comex Gold futures are in a position to test a key retracement zone at $1306.60 to $1291.50. Trader reaction to this zone should determine the near-term direction of the market. Holding above $1306.60 will indicate the presence of buyers. A failure at this level will indicate the selling is getting stronger. This could trigger an acceleration to the downside with $1291.50 the next likely target. This level is another potential trigger point for a steep break.

The major U.S. reports this week that should influence the price action are consumer inflation, retail sales, producer inflation and building permits.

On February 14, traders will get the opportunity to react to the monthly CPI report. Consumer inflation is expected to rise 0.3%. Core CPI is expected to come in 0.2% higher.

Retail Sales are expected to rise 0.5%. Core Retail Sales are called 0.2% higher.

Producer Inflation (PPI) is expected to rise 0.4%. Building Permits are forecast at 1.31M, slightly above the previous 1.30M.

Stronger-than-expected consumer inflation will likely be bearish for gold prices because it will signal that inflation is rising and that the Fed may have to raise interest rates more aggressively this year.