Price of Gold Fundamental Weekly Forecast – Weak Dollar, Stocks Should Underpin Prices

Gold prices were under pressure much of last week due to rising interest rates and a stronger U.S. Dollar, however, the market was able to claw back most of its weekly loss late in the week in reaction to sharply lower U.S. equity prices and a weaker U.S. Dollar. The catalyst behind the market’s strength was the threat of a global trade war, fueled by President Trump’s announcement on Thursday of tariffs on steel and aluminum.

April Comex Gold futures settled at $1323.40, down $6.90 or -0.52%.

Early in the week, the gold fell in reaction to a sharp rise in U.S. Treasury yields. Yields were boosted by hawkish comments from Fed Chair Jerome Powell who said the central bank could raise interest rates three or more time during the course of this year to prevent the U.S. economy from overheating.

“We’ve seen some data that in my case will add some confidence to my view that inflation is moving up to target,” Powell told lawmakers on Tuesday. “We’ve also seen continued strength around the globe. And we’ve seen fiscal policy become more stimulative. So I think each of us is going to be taking the developments since the December meeting.”

Gold hit its low on Thursday before rallying on Friday. The strength in the market was fueled by President Trump’s announcements of tariffs on steel and aluminum. The news raised fears of a trade war and worries over the return of robust inflation.

Trump said the U.S. will implement a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports this week. The surprise announcement sent stocks reeling, with the Dow losing about 500 points over two session. It also raised concern that Canada, Asia and Europe may implement retaliatory tariffs on U.S. exports.

Forecast

The strong finish in gold on Friday and the uncertainty over when and how the rest of the world will respond to Trump’s tariff announcement is likely to be supportive for prices this week.

Gold’s price action will be dictated by the direction of the U.S. Dollar and U.S. equity prices. Gold prices will rally if the dollar continues to weaken and equities continue to drop sharply. Gains could be limited by sharply higher interest rates.

In other news, traders will also be influenced by the ISM Non-Manufacturing PMI report on Monday and the U.S. Non-Farm Payrolls report on Friday.

The jobs report is expected to show that Average Hourly Earnings rose 0.3% in February. The Non-Farm Employment Change is expected to show a rise of 204K and the Unemployment Rate is expected to drop from 4.1% to 4.0%.