Price of Gold Fundamental Weekly Forecast – Weaker Dollar Will Drive Up Demand for Dollar-Denominated Gold

This week, gold traders will get the opportunity to react to the Fed’s interest rate decision and monetary policy statement. Central bank policymakers are widely expected to leave its benchmark interest rate unchanged. Additionally, it may announce it is considering ending its policy to reduce its balance sheet. Both moves are dovish because they point towards an easing of monetary policy. This could drive the U.S. Dollar lower, making dollar-denominated gold a more attractive asset.
James Hyerczyk
Comex Gold

Gold finished higher for week with the market being saved on Friday by a sharp break in the U.S. Dollar. The greenback fell in reaction to a report that the U.S. Federal Reserve planned some dovish changes to monetary policy while leaving interest rates unchanged. Throughout the week, gold was pressured by weak economic data from China, a bearish outlook on the global economy and dovish forecasts from central banks.

For the week, April Comex gold settled at $1304.20, up $15.30 or +1.19%. All of the week’s gains were generated by Friday’s $18.30 rise.

Fueling the sell-off in the U.S. Dollar was a report from The Wall Street Journal. According to the WSJ, Federal Reserve officials are nearing a decision on when to end the reduction of the Treasury bonds it is holding on its balance sheet, a key consideration for investors watching how far the central bank will go in tightening monetary policy. A looser policy is bearish for the U.S. Dollar and bullish for dollar-denominated gold.

It’s not a given, just speculation at this time. However, The WSJ went on to say that further consideration of when to end the roll-off is likely to come up at the next Federal Open Market Committee meeting on January 30.

“A lot of the heavy lifting has been done,” Kansas City Fed President Esther George told The Wall Street Journal in a January 15 interview. “We’re waiting for the committee to be satisfied that they have reached sufficient understanding of what all the moving pieces are.”

Earlier in the week, gold was pressured after China reported weak Q4 GDP data and the International Monetary Fund (IMF) cut its forecasts for the world economy in 2019 and 2020.

The IMF cut its growth forecasts for 2019 and 2020 because of weakness in Europe and some emerging markets. It also said failure to resolve trade tensions could further destabilize the global economy.

Gold was further weakened by dovish monetary policy statements and remarks from the Bank of Japan and the European Central Bank.

Forecast

This week, gold traders will get the opportunity to react to the Fed’s interest rate decision and monetary policy statement. Central bank policymakers are widely expected to leave its benchmark interest rate unchanged. Additionally, it may announce it is considering ending its policy to reduce its balance sheet. Both moves are dovish because they point towards an easing of monetary policy. This could drive the U.S. Dollar lower, making dollar-denominated gold a more attractive asset.

On Friday, traders will be watching the U.S. Non-Farm Payrolls report. It is expected to show the economy added 165K jobs in January. The unemployment rate could drop to 3.8% and Average Hourly Earnings are expected to come in at 0.3%.

Additional reports are Conference Board Consumer Confidence and ISM Manufacturing PMI.

The wildcard is the impact of the opening of the government and the start of high level trade talks between U.S. and Chinese officials on January 30-31.

 

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US