Price of Gold Fundamental Weekly Forecast – Rally Capped by Rising Interest Rates, Firm Dollar, Appetite for Risk

Gold prices closed lower after early weekly strength failed to gain enough upside momentum to continue the move. Bullish traders seemed to be unfazed by the release of the Republican version of U.S. tax reform, the Fed dropping hints of a December rate hike in its November monetary policy statement and President Donald Trump’s nomination of Federal Reserve Governor Jerome Powell to be the next Fed chair.

December Comex Gold finished the week at $1269.20, down $2.60 or -0.20%.

On Friday, gold was initially boosted from worse-than-expected U.S. jobs numbers in October, but even this wasn’t enough to sustain the move.

At the end of the week, sellers probably took control because of the pressure from rising Treasury yields, a firmer U.S. Dollar, and increased demand for higher-yielding assets.

U.S. economic news was supportive for the most part. U.S. Consumer Confidence rose to 125.9, beating the 121.1 estimate. ISM Manufacturing PMI came in slightly below the estimate. Weekly Unemployment Claims were better than expected. ISM Non-Manufacturing PMI was better than expected at 60.1.

The Non-Farm Payrolls report was somewhat disappointing. The Non-Farm Employment Change came in at 261K, under the 312K estimate. Average Hourly Earnings were flat at 0.0%, below the 0.2% estimate. The Unemployment Rate fell from 4.2% to 4.1%.

Forecast

The economic schedule is light this week. Traders will get the opportunity to react to a speech by Fed Chair Janet Yellen on Tuesday and Weekly Unemployment Claims on Thursday. Several other Fed members are also scheduled to speak.

The tone of the market this week is likely to be determined by trader reaction to two levels. Gold could turn bullish if buyers could sustain a move over $1286.80. The selling pressure is likely to increase if $1263.80 fails as support with $1257.10 the next likely target.

The catalyst behind any rally is likely to be related to political and geopolitical events. The selling pressure will be attributed to rising interest rates, a firmer U.S. Dollar and increased appetite for risk.