Price of Gold Fundamental Weekly Price Forecast – Democrat Victory Could Spell Doom for Stocks, Increase Gold’s Appeal as Safe Haven Asset

Gold futures posted a two-sided trade last week before settling marginally lower. The volatility was mostly fueled by the movement in the U.S. Dollar which was driven by U.S. economic data, stock market volatility and reports of a potential trade deal between the United States and China. In the end, it seemed like investors were primarily influenced by the prospect of further rate hikes by the U.S. Federal Reserve as Treasury yields resumed their upward climb.

For the week, December Comex Gold futures settled at $1233.30, down $2.50 or -0.20%.Price of Gold Fundamental Weekly Price Forecast – Democrat Victory Could Spell Doom for Stocks, Increase Gold’s Appeal as Safe Haven Asset

The U.S. Dollar was boosted last week by solid economic data that likely kept the Fed on track for a December rate hike and at least three more in 2019.

The Conference Board’s Consumer Confidence report came in at 137.9, beating the 136.3 estimate. The previous month was revised lower to 135.3, but this didn’t matter to investors.

The ISM Manufacturing PMI came in lower than expected at 57.7, versus a 59.0 forecast.

Friday’s U.S. jobs report for October showed the Non-Farm employment Change rising by 250K, versus a 194K forecast. However, the previous month was revised lower to 118K. The Unemployment Rate was 3.7% as expected. Average Hourly Earnings came in at 0.2%. Wages are up 3.14 percent over the past 12 months through the end of October.

While most of the downside pressure on gold early in the week was fueled by a soaring U.S. Dollar, which hit a 16-month high against a basket of currencies last week, gold did spike higher on Thursday after the bottom fell out of the dollar.

The dollar plunged and gold rallied after the British Pound posted its biggest one-day gain in nine months on reports that London is close to sealing a financial services deal with Brussels.

The dollar was hit even harder late Thursday/early Friday on the hopes that China would ramp up fiscal stimulus. The lifting of long U.S. Dollar hedges also contributed to the weakness. Investors sold dollar positions bought as a safe-haven asset after global equity markets soared following a tweet from President Trump that said he had a “very good” talk with Chinese President Xi Jinping on trade and North Korea and that the two planned to meet at the upcoming G-20 summit. The greenback was pressured further on Friday after a Bloomberg report said Trump was seeking a trade agreement with Chinese President Xi Jinping.

The dollar rose and gold fell on Friday after the release of an upbeat U.S. jobs report. U.S. jobs growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, which should keep the Fed on track for additional rate hikes.

Safe-haven buyers returned late Friday, allowing the U.S. Dollar index to recapture some of its late-in-the-week losses after a senior Trump administration official dismissed the report of a possible trade deal with China as untrue, CNBC reported.

Forecast

The problem with the gold market at this time is expectations of rising interest rates. Furthermore, traders don’t know if the market is a safe-haven asset or an investment. So I have to conclude, you’re better off watching the direction of the U.S. Dollar then trying to figure out gold’s identity.

There are economic reports this week that could influence gold prices. These include ISM Non-Manufacturing PMI and Producer Inflation.

The U.S. Federal Reserve will also release its latest monetary policy decision on Thursday. It is widely expected to leave its benchmark rate unchanged at 2.25%. However, investors will be more interested in its monetary policy statement which could include commentary on stock market volatility.

The wild card this week is Tuesday’s U.S. Mid-Term Elections. The results are too difficult to predict. All we can say is expect volatility if either party wins.

If the Republicans win then expect Status Quo. Stocks are likely to soar and gold could break. It depends on the direction of the U.S. Dollar because some of the strength in the dollar is being fueled by rising interest rates and some by safe-haven buying.

A win by the Democrats could be chaotic because this will weaken President Trump’s position as leader. Traders may read this as the beginning of the end for the economic recovery. Gold is likely to rally if the Democrats gain control of Congress. Stocks could crash which would increase gold’s appeal as a safe-haven asset.