Price of Gold Fundamental Weekly Forecast – Stock Market Liquidation Will Help Gold Bulls

For the first time in a while, gold investors had something to cheer about, but the buyers didn’t show up to fuel a bullish breakout to the upside. Last week, North Korea launched its first ballistic missile in two months, the U.S. tax overhaul hit a snag and a key ex-member of the Trump Administration copped a plea with the Feds.

Gains were thwarted by a hawkish outlook for U.S. interest rates and a stock market that went ballistic on its own.

February Comex Gold futures finished the week at $1282.30, down $9.50 or -0.74%.

Gold was pressured early in the week during the testimonies of Fed Chair nominee Jerome Powell and current Fed Chair Janet Yellen. Both hinted that the Fed was ready to raise interest rates.

During his Senate confirmation hearing Tuesday, Powell did not commit definitively to a December rate hike, but strongly hinted that the likelihood is growing. In doing so, he also indicated that markets can expect more of the same from Fed leadership, even though there will be a new person in the chair position.

“The case for raising interest rates at our next meeting is coming together,” Powell told the Senate Banking Committee. “I think the conditions are supportive of doing that.”

On Wednesday Fed Chair Yellen pressured gold when she said the central bank is concerned with letting growth get out of hand so is committed to continuing to raise rates in a gradual manner. Yellen did not specifically commit to a December rate hike, but indicated that her views have not changed with her desire for the central bank to continue normalizing policy.

Gold prices were also pressured mid-week when the Senate moved to start debate on the Republican tax bill. Traders primary ignored the news that North Korea launched another ballistic missile and that the tax reform bill had stalled on Thursday.

The precious metal did respond positively to reports Michael Flynn may implicate President Donald Trump in the Mueller Russian investigation but this was only because U.S. stock markets plunged on the news.

Forecast

Friday’s price action summed up the gold market. Prices will be capped or even trend lower if the U.S. continues on a path toward higher interest rates and U.S. stock indexes keep hitting all-time highs. Gold prices will rally if U.S. equity markets drop sharply from current price levels.

It should also be noted that although the North Korean missile launch did not trigger a breakout to the upside, the fact that the rogue nation is still relevant and may be trying to get the U.S. to respond militarily, could be enough to underpin gold or prevent a steep sell-off.

Tax reform is still an issue as well as the Mueller investigation. However, gold prices will not be affected too much unless both of these issues raise enough concerns to trigger a massive exodus from stocks.