Price of Gold Fundamental Weekly Forecast – Will Mueller Investigation Indictments Drive Gold Higher?

Gold finished the week lower, mostly in reaction to a stronger U.S. Dollar, rising U.S. Treasury yields and increasing appetite for risk. Despite this bearish factors, the loss for the week was mild, compared to other weeks. This suggests that speculators may be coming in on weakness due to lingering concerns over North Korea, tensions in Spain and political uncertainty surrounding the Trump administration.

December Comex Gold closed at $1271.80, down $8.70 or -0.68%.

The primary driving force this week was a strong surge in the U.S. Dollar which made dollar-denominated gold a less desirable investment. The dollar soared against a basket of currencies after the Euro fell to a three-month low after the European Central Bank extended its bond purchases, reducing the odds that it would hike interest rates in 2018.

U.S. Treasury yields were driven higher by optimism over the passing of U.S. tax reform and the strong possibility that President Trump would appoint a hawkish Fed Chair.

Speculators are betting Trump has whittled his choices to two candidates, Fed Governor Jerome Powell and Stanford University economist John Taylor. The latter is considered the more hawkish of the two so his selection should have a bullish impact on the dollar.

Gold was also pressured by U.S. equity markets which reached new all-time highs last week on the back of bullish earnings reports.

Despite the stronger U.S. Dollar, gold closed higher on Friday, posting a potentially bullish closing price reversal bottom in response to the Catalonian parliament’s independence declaration from Spain. The political upheaval news drove investors into the safety of gold.

Forecast

This week’s price action is likely to be news driven. Underpinning the market early is likely to be the news from Spain regarding Catalonian’s independence. Investors are likely to continue to move money into safe haven assets if this issue escalates into military activity in the region.

North Korea stepped up its defiant rhetoric against the U.S. on Friday and said the U.S. is making “criminal moves for igniting a war of aggression,” according to a state-run outlet.

Also late Friday, a federal grand jury in Washington approved the first charges in the investigation led by special counsel Robert Mueller into alleged Russian meddling in the 2016 U.S. presidential election.

The charges are sealed under orders from a federal judge, and it was not clear what the charges were, adding that anyone facing charges could be taken into custody as soon as Monday.

Gold prices could rise sharply depending on who is named in the indictments. The biggest reaction is likely to come if someone close to President Trump is named.

There is potentially bullish news out there so investors should be prepared for anything. This news may even overcome a stronger dollar as seen on Friday.

We’re looking for increased volatility this week. Prices are likely to be pressured if a rising U.S. Dollar continues to be the main focus. Gold could rise if the issues regarding Catalonian independence, North Korea or the Fed indictments drive investors into lower-risk assets.