Price of Gold Fundamental Weekly Forecast – Traders Worried Biden May Compromise on Size of Stimulus Package

Gold futures posted a rare monthly, weekly lower close as investors seemed to be sitting on the sidelines waiting for something to happen, while the rest of the trading world was watching U.S. stocks post their worst weekly performance since October amid an on-going battle between aggressive, organized retail traders and massive hedge funds.

Investors also appeared to be waiting for some movement in Washington on President Joe Biden’s $1.9 trillion stimulus package. They may get some action this week, but it may be in the form of a smaller coronavirus relief bill as Republicans continue to say his proposal is just too expensive.

Meanwhile, the U.S. Dollar continues to firm which makes dollar-denominated gold more expensive for foreign buyers. Additionally, there is talk that the greenback could move even higher over the near-term as speculators are increasing bets the U.S. economy, backed by an improving rollout of the COVID-19 vaccine, will continue to improve at a faster pace than most of the other major economies.

Finally, if a short-squeeze in GameStop was exciting enough last week, there was also chatter over the weekend that the group targeting the heavily shorted stocks may have their eyes set on creating the same havoc in the silver market.

Last week, April Comex gold settled at $1850.30, down $5.90 or -0.32%.

Weekly Forecast

This week, traders will be keeping an eye on the improving U.S. economy and its potential influence bullish influence on U.S. Treasury yields, which could help make the U.S. Dollar an even more attractive asset.

Last month, the greenback rose about 0.8%, helped by higher Treasury yields. Higher yields on bonds make gold a less attractive investment because it pays no interest.

The dollar was boosted last week by a report that showed U.S. jobless claims fell in the latest week, while fourth-quarter gross domestic product figures met expectations.

This week, the key reports are Monday’s Manufacturing PMI and Friday’s U.S. Non-Farm Payrolls. A preliminary report in January on manufacturing PMI came in well above expectations. However, since that data was released, we’ve seen a jump in coronavirus cases so we could see a slight dip in the actual number. Nonetheless, the number is expected to be well-above the 50-level that separates contraction from expansion.

Non-Farm Payrolls are predicted to come in only slightly better than the previously reported loss of 140K jobs in December. A stronger than expected number could trigger a spike higher in Treasury yields, which would put further pressure on gold prices.

Gold prices could also feel some pressure if President Biden decides to reach a compromise with Republicans over the size of his stimulus package.

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