Price of Gold Fundamental Weekly Forecast – Stock Market Recovery Could Encourage Investors to Cut Long Gold Positions

Gold futures rallied to nearly a three-month high last Monday as safe-haven buyers anticipated another steep plunge in U.S. equity markets. However, the market traded sideways the rest of the week. Gains were limited by a steady stock market and higher Treasury yields. Nonetheless, early buyers still managed to hang on to some of their gains.

Last week, December Comex Gold settled at $1228.70, up $6.70 or +0.55%.

A sharp rise in the U.S. Dollar also kept a lid on dollar-denominated gold. It was driven higher by a weaker U.S. Dollar and hawkish Federal Reserve minutes.

The minutes from the U.S. Federal Reserve’s September meeting showed that Fed policymakers are largely united on the need to raise borrowing costs further. The minutes showed officials believe the central bank should continue to increase interest rates to ensure a stable economy.

A summary of the Federal Open Market Committee’s September session revealed both confidence in the rate of economic growth, as well as some concern over the impact tariffs, might have on GDP.

“With regard to the outlook for monetary policy beyond this meeting, participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term,” the minutes read.

U.S. equity markets finished mixed last week with the Dow Jones Industrial Average posting a weekly gain, while the S&P 500 Index and NASDAQ Composite finished lower. All three major indexes held above the previous week’s low. There were also indications that volatility was easing.

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Forecast

Fresh economic data will be sparse next week so gold traders are likely to continue to respond to the movement in Treasury yields, the direction of the U.S. Dollar and stock market volatility.

Gold could start to feel pressure if yields rise and the stock market remains steady. This will be a sign that investors have priced in a few of the Fed’s future rate hikes.

The trade in the U.S. Dollar Index could be mixed. Rising rates will underpin the greenback, but higher stocks could encourage investors who bought the dollar as a safe-haven asset to begin liquidating positions. A strong Euro could also put pressure on the dollar index.

If stocks rally, gold’s appeal as a safe-haven asset will be diminished. Investors aren’t likely to hold onto gold positions if there is no need for safety.

The major economic reports this week will be Thursday’s Durable Goods and Friday’s Advance GDP. Core Durable Goods are expected to have risen 0.3%. This will be up from 0.0%. Advance GDP is expected to have risen 3.3%, lower than the previously reported 4.2% at the end of the second quarter.