Price of Gold Fundamental Weekly Forecast – Weak Dollar Could Trigger Breakout Over $1212.10

Gold prices fell last week, driven lower by a stronger U.S. Dollar and rising U.S. Treasury yields. The catalysts behind the move were trade worries and stronger-than expected U.S. economic data, which solidified the chances of additional rate hikes by the Fed. Trade worries drove investors into the dollar for safe-haven protection. Rising rates made the dollar a more attractive investment for foreigners.

For the week, December Comex gold settled at $1200.40, down $6.30 or -0.52%.

Gold was pressured and the dollar underpinned on escalating U.S.-Sino trade tensions, although the Greenback has lost some of its steam recently due to increases in rival safe haven currencies like the Japanese Yen and Swiss Franc.

Traders are on edge because a public consultation period for proposed U.S. tariffs on an additional $200 billion for Chinese imports ended at 0400 GMT on Friday and the Trump administration can impose those tariffs at any moment, though there is no clear timetable.

Rising Treasury yields also weighed on gold prices. The yield on the benchmark two-year Treasury note jumped to its highest level in more than 10 years Friday after the economy added more jobs than expected in August and wages posted their biggest increase of the post-recession period.

According to the Labor Department, nonfarm payrolls grew by 201,000 in August while average hourly earnings rose 2.9 percent for the month on an annualized basis. On a monthly basis, wages jumped 10 cents or 0.4 percent. Economists had expected payrolls to increase 191,000 and wages to increase 0.2%. The unemployment rate held steady at 3.9%.

Forecast

The focus for gold traders will remain on the U.S. Dollar. Those betting on higher gold prices are also betting on a lower U.S. Dollar. The dollar could struggle over the near-term because other central banks are becoming hawkish. Of particular concern is the British Pound and the Euro, which could firm because of central bank tightening.

Additionally, recent government data showed that professional traders are beginning to lighten up on their record net short positions in gold. Furthermore, a recovery in emerging market currencies could also weigh on the dollar, pushing gold prices higher.

Other headwinds for the dollar could come from a rising Japanese Yen. The Japanese currency was bolstered late last week after President Trump suggested he would next take up trade issues with Japan.

U.S. economic data could also influence gold prices this week. On Wednesday, the U.S. will release the Producer Price Index (PPI). It is expected to rise 0.2% from 0.0% last month. The Consumer Price index (CPI) is expected to show an increase of 0.3%. Core CPI is expected to rise 0.2%.

Core Retail Sales are forecast to have risen 0.5%. Retail Sales are expected to have risen 0.4%.

The charts indicate that December Comex gold is building a support base. The trigger point for an acceleration to the upside this week is $1212.10. This move, if helped by strong buying volume, could drive prices to $1250.60.