Price of Gold Fundamental Weekly Forecast – Could Be Pressured by Rising Rates, Stronger Dollar, Hawkish Fed

Gold prices closed lower for a third week with the selling pressure driven by rising U.S. Treasury yields, expectations for further rate hikes by the Fed and the easing of geopolitical tensions. All of these factors drove the U.S. Dollar higher, pressuring foreign demand for dollar-denominated gold.

For the week, June Comex Gold futures settled at $1323.40, down $14.90 or -1.11%.

The U.S. Dollar broke out of a nine-week range against a basket of currencies and even moved higher for the year before pulling back into Friday’s close. Nonetheless, the Greenback was able to post its strongest weekly performance since November 2016.

The primary catalyst behind the dollar’s rally and gold’s weakness was a sharp rise in U.S. Treasury yields. On Tuesday, the U.S. benchmark 10-year U.S. Treasury note yield broke through the psychologically significant 3-percent level for the first time in more than four years as investors reduced their U.S. bond holdings on worries about rising inflation and growing government debt supply.

In other news, according to the Conference Board, Consumer Confidence rose to 128.7, beating expectations. Durable Goods Orders came in at 2.6%, below the previous read, but better than the estimate. Core Durable Goods Orders came in flat at 0.0%, below the estimate. Advance GDP also beat the forecast with a 2.3% read. However, economists were still concerned about low consumer spending.

The economic data was strong enough to support at least two additional rate hikes by the Fed later this year. This should keep a lid on any rallies in gold.

Investors also dumped gold in response to an easing of geopolitical concerns particularly diminishing worries over a U.S.-China trade war and the outbreak of peace between North and South Korea.

Forecast

The same factors that drove gold lower for a third consecutive week will influence the market this week. They include rising Treasury yields, a firmer U.S. Dollar and the easing of geopolitical uncertainty.

With the new month comes fresh U.S. economic data that could influence Fed policy. Any report that shows rising inflation will be especially bearish on gold if they trigger another spike in U.S. Treasury yields.

The major reports this week include ISM Manufacturing PMI, ISM Non-Manufacturing PMI and the U.S. Non-Farm Payrolls report.

The U.S. Federal Reserve will also release its latest interest rate decision and monetary policy statement. It is not expected to raise rates at this meeting, but widely expected to do so in June. In its monetary policy statement it could offer hints as to whether it expects to raise rates two or three more times this year.

In the absence of renewed geopolitical concerns, a hawkish Fed could drive gold prices sharply lower. The key downside target is $1311.40 to $1296.20.