Price of Gold Fundamental Weekly Forecast – Traders Watching Inflation Data, Fed Speakers, Iran Sanctions Decision

It was a tale of two markets last week with gold hitting its lowest level since December 27 early in the week and rebounding enough late in the week to offset most of that early loss.

Early in the week, gold was driven lower by a series of events including high Treasury yields, expectations of further rate hikes by the Fed later this year and the easing of geopolitical tensions.

June Comex Gold futures settled at $1314.70, down $8.70 or -0.66%.

At the start of the week, 10-year U.S. Treasury yields continued to hover near the psychological 3.00 percent level briefly breached the previous week. Gold was also being pressured ahead of the Fed’s interest rate decision and monetary policy agreement. Gold traders were also optimistic ahead of the two-day meeting between the United States and China over trade issues and the “peace” agreement between North Korea and South Korea.

At the Fed meeting, policymakers decided to leave interest rates unchanged while acknowledging that inflation was rising. However, it left no hints as to whether there would be two or three more rate hikes in 2018. This may have been enough to provide some support for gold although gains are likely to be limited because a June rate hike has already been priced into the market.

The meeting between the United States and China yielded no results as expected. The U.S. did present China with a list of demands which suggests there will be further meetings in the future. The presentation of the list of demands indicates the U.S. is taking a hardline approach toward trade which could lead to fresh volatility in the equity markets due to trade war fears. This may be enough to underpin gold prices.

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Forecast

Gold prices found support last week inside a major technical retracement zone at $1311.40 to $1296.20. Buyers may have come in at $1302.30 in an effort to defend this zone. Trader reaction to $1311.40 should set the tone of the market early in the week. The longer-term tone will be determined by trader reaction to the entire zone.

Fundamentally, Friday’s U.S. Non-Farm Payrolls report came in weaker than expected. The headline number was below expectations but the unemployment rate fell to an 18-year low. The key concern for the Fed was disappointing Average Hourly Earnings. This number may be enough to encourage the Fed to be less aggressive with interest rates which could provide some support for gold.

While trade talks between the U.S. and China may have yielded no results this time, they are expected to be on-going. Nonetheless, gold could be supported if this situation creates geopolitical uncertainty.

Gold traders will also be watching for the U.S. response to renewed sanctions against Iran. This issue may come late in the week since the deadline for a decision is May 12. Once again volatility in the financial markets will be driving the movement in gold.

As far as reports are concerned, inflation will be at the forefront once again with the U.S. scheduled to report on Producer and Consumer Prices on Wednesday and Thursday respectively.

Several Fed speakers are also on tap including Fed Chair Jerome Powell on Wednesday at 1915 GMT.