Price of Gold Fundamental Weekly Forecast – Bullish Conditions, but Traders Worried About Margin-Call Selling

Buyers returned to the gold market last week as an alternative to the stock market, which remains under pressure. However, as an investment that pays no interest, it is still competing with Treasury bonds, which pay interest and are guaranteed by the full-backing of the U.S. government, for investor dollars.

Last week, April Comex gold settled at $1672.40, up $105.70 or +6.75%.

Gold prices will continue to get a boost from a falling dollar and lower Treasury yields, but investors are a little leery about how it will perform if the stock market breaks another 10% or more. Two weeks ago, gold prices plunged as investors sold the precious metal to cover margin calls as the rapid spread of the coronavirus hammered equity markets.

The impact of the coronavirus should continue to dominate the news this week. Additionally, expect gold to continue to move higher as long as the virus is controlling the headlines. The virus news should continue to raise concerns over a global recession and bring interest rates to zero or lower. Both factors should be bullish for gold.

However, it doesn’t mean the rally will be a moon shot. We could continue to see volatile swings in gold if stocks collapse. This is the way gold traded during the 2008-2009 financial crisis before finally settle into a range and began to move higher.

Trying to time the day to day swings will be a challenge, but with interest rates around the world hovering near all-time lows, the best strategy for gold is to maintain an upside bias, buy it when it retraces into a value area and you have identified an exit if you are wrong, and sell when its relatively expensive.

Weekly Outlook

We’re looking for the rally to pick up where it left off last week, but with upside momentum a little more tentative as investors remain worried that a stock market collapse will trigger fresh margin call selling.

A sudden rise in Treasury yields and the U.S. Dollar will also weigh on gold prices.