Price of Gold Fundamental Weekly Price Forecast – Technicals, Fundamentals Indicate Bullish Shift in Sentiment

James Hyerczyk
Comex Gold
Comex Gold

Gold futures may have formed a major bottom last week with the rally being fueled by a weaker U.S. Dollar. The technically bearish chart pattern formed by the dollar on the weekly chart suggests a major top may have been reached and this could trigger a strong surge in gold prices.

For the week, December Comex Gold futures settled at $1223.00, up $14.40 or 1.19%.

It’s not the weaker U.S. Dollar per se that is supporting gold, but the catalysts behind the greenback’s weakness. Simply stated, a weaker U.S. Dollar tends to support the dollar-denominated market because it makes gold a cheaper, more attractive asset.

Three factors could drive gold prices higher this week. Firstly, inflation may not be overheating after all due to plunging oil and gasoline prices. Secondly, Fed Chairman Jerome Powell said in a speech last Wednesday that he see risks ahead and thirdly, Fed Vice-Chairman Richard Clarida told CNBC on Friday the Fed is getting closer to neutral and that there is “some evidence” that the world economy is slowing.

Forecast

When Fed officials start talking about a weakening economy or the central bank getting closer to neutral, then this tends to drive Treasury yields lower. When Treasury yields start to move lower, the U.S. Dollar tends to become a less attractive investment. And when the dollar gets weaker, demand tends to rise for gold. This is the scenario we are facing at this time.

This week is a holiday-shortened week in the U.S. so volume is expected to come in below average. This can cause two things to happen. Low volume cold lead to low volatility and a range bound trade. This may not be good for traders this week, but it could mean that volatility will pick up the week after.

Low volume and the absence of major players could also lead to increased volatility and in this case, without a “stopper” in the market, prices could surge to the upside because of the possible shift in the fundamentals to the bullish side.

We’d like to see the Commodity Futures Trading Commission’s Commitment of Traders report to see if short sellers reduced positions or if long investors increased their positions. This would give us confidence that sentiment is shifting to the upside.

In other news, Durable Goods is the only major report in the U.S. Minor reports include Building Permits, Housing Starts, and Revised University of Michigan Sentiment.

We may be early but the technical chart pattern and the fundamentals are indicating a shift in investor sentiment to the upside. However, due to the U.S. holiday, there may be a delay in the move. You’re going to have to read the price action and order flow to determine that.

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