Price of Gold Fundamental Weekly Forecast – Knee-Jerk Rally to Trump’s Signing of Pandemic Relief Bill

In the gold market, we’re looking at a replay of last Monday’s action that was interrupted by the news of a new variant of the coronavirus. Gold is trading sharply higher at the start of the start of the week as investors responded positively to the news that President Trump had signed the pandemic relief and government spending stimulus packages.

Whether the upside momentum continues beyond last week’s high of $1912.00 is likely to be determined by the trading volume. Traders are facing another holiday-shortened week which could mean a gradual decrease in volume as we head into the New Year.

Nonetheless, if you’re going to trade then be prepared for the possibility of heightened volatility since many of the major players will be on the sidelines. This likely means we’ll see excessive computer trading, or a possible rogue trader who tries to make a market by causing wild price swings due to the absence of a stopper in the market.

Trump Signs Pandemic Relief and Government Funding Bill

Trump’s signing of the bill has fueled a major reaction in the financial markets with U.S. stock index futures and gold rallying, and the U.S. Dollar and 10-year Treasury Notes moving lower. The bill which totaled about $2.3 trillion in pandemic aid contains a spending package, restores unemployment benefits to millions of Americans and averts a federal government shutdown in a crisis of his own making.

Reuters is reporting that Trump, who leaves office on January 20 after losing November’s election to President-elect Joe Biden, backed down from his threat to block the bill, which was approved by Congress last week, after he came under intense pressure from lawmakers on both sides.

The Republican president, who golfed on Sunday and remained out of public view even as the potential government crisis loomed, had demanded that Congress change the bill to increase the size of stimulus checks for struggling Americans to $2,000 from $600.

It was not immediately clear why Trump changed his mind as his resistance to the massive legislative package promised a chaotic final stretch of his presidency, according to Reuters.

White House officials have been tight-lipped about Trump’s thinking but a source familiar with the situation said some advisers had urged him to relent because they did not see the point of refusing.

“Good news on COVID Relief Bill. Information to follow!” Trump said in a cryptic message on Twitter earlier on Sunday evening but he offered no explanation.

Weekly Forecast

It’s unusual to see gold moving higher at the same time stocks are approaching record highs and while Bitcoin gapped to a record high. But this has been an unusual year. Nonetheless, I don’t expect to see much upside from gold from the stimulus news. We’re probably looking at a knee-jerk reaction.

I do expect gold to remain supported because of the ongoing monetary stimulus from the Federal Reserve and additional fiscal stimulus from the Biden Administration after Joe takes office on January 20.

The biggest concern for gold traders will be the vaccines. At this time, traders are betting on a successful launch of the vaccine to possibly bring the pandemic to an end. This is why I think gold’s gains will be limited. However, at some time in the near future, investors are going to want to see some results especially after the experts are predicting a major crisis in the United States in January.

For a look at all of today’s economic events, check out our economic calendar.