Price of Gold Fundamental Weekly Forecast – U.S. CPI Data Should Trigger Biggest Reaction This Week

Gold prices managed to eke-out a small gain last week as the market was dominated by neither bullish nor bearish investors. Conflicting fundamentals set the sideways tone. At times, bearish investors were driven to sell by a stronger U.S. Dollar and increased demand for risky assets while bullish investors were led by concerns over a trade war.

April Comex Gold futures settled at $1324.00, up $0.60 or +0.05%.

Gold was also negatively influenced by the news that President Trump was prepared to meet North Korea’s Kim Jong Un sometime before May in what would be the first face-to face encounter between the countries’ leaders and could mark a breakthrough in a stand-off over the North’s nuclear weapons. This helped ease fears of geopolitical risk.

Prices fell early Friday after the release of stronger-than-expected U.S. jobs data. The U.S. Bureau of Labor Statistics reported the economy added 313,000 jobs in February, well-above the 200,000 estimate. The unemployment rate was unchanged at 4.1%. Traders were looking for a drop to 4.0%. Average hourly earnings remained a concern, coming in at 0.1%, below the 0.2% forecast. Essentially, wages grew less than expected, rising 2.6 percent on an annualized basis.

Gold recovered on Friday enough to close higher for the session and the week. The move was likely related to renewed fears over a trade war and aggressive position-squaring ahead of this U.S. consumer inflation report.

Forecast

Gold traders will be focused on U.S. Consumer Inflation this week because it will likely influence next week’s Federal Open Market Committee Economic projections. Traders are looking for CPI to come in at 0.2%, down from the previously reported 0.5%. Core CPI is also expected to come in at 0.2%, down slightly from 0.3%.

U.S. Producer Inflation is expected to rise slightly by 0.1%, down from the previously reported 0.4%.

U.S. Retail Sales are expected to make a recovery from last month’s disappointing -0.3% performance with a reading of 0.3%.

Finally, Building Permits are expected to come in at 1.33M, down from 1.38M. Rising mortgage rates may weigh on this report.

With Average Hourly Earnings coming in lower than expected in last week’s Non-Farm Payrolls report for February, traders will be glued to the CPI number. A weak performance will likely mean the Fed will only raise rates a total of three times in 2018, instead of the four that some traders have been counting on.

A CPI miss will likely drive the U.S. Dollar lower which should underpin gold prices. Stronger than expected CPI data should be bearish for gold.