Price of Gold Fundamental Daily Forecast – Drop in Demand for Risk Could Launch Rally Over $1307

Gold prices are trading higher shortly after the opening. The market is currently within striking distance of last week’s high at $1301.40 and the August 18 top at $1306.90. According to chart watchers, the trigger point for a potential breakout to the upside is $1307.00.

Helping to support the market is the speech from Fed Chair Janet Yellen made the previous session at the central bankers’ symposium at Jackson Hole, Wyoming. In her speech, Yellen failed to mention monetary policy which traders read as dovish.

No one really expected Yellen to address future interest rate hikes, but some thought she’d mention her concerns over low inflation and perhaps announce the start of the Fed’s plan to begin trimming its massive $4.5 trillion balance sheet after the September FOMC meeting.

Gold was also supported on Friday by a steep drop in the U.S. Dollar Index. The index plunged after the Euro rallied to a 2 ½ high in response to a speech by European Central Bank President Mario Draghi. In his speech on Friday at Jackson Hole, Draghi refrained from talking down the single currency.

In other news, Yellen sent a message to President Trump, saying that if he re-nominates her as Federal Reserve Chair, she will not turn her back on the raft of U.S. financial reforms that Republicans want to roll back.

Federal Reserve Governor Jerome Powell also said low inflation and a strong labor market in the United States are allowing the Federal Reserve to be “patient” about when it next raises interest rates.

Dallas Federal Reserve Bank President Robert Kaplan repeated his call for patience on raising interest rates any further but called for the speeding up of the reduction of the Fed’s balance sheet.

Forecast

The CMEGroup’s FedWatch Tool indicates that there is about a 37 percent chance of a Fed rate hike in December. Low rates should continue to be supportive for gold, but I believe it’s going to take a steep sell-off in the stock market to send it through the major resistance at $1307.00.

This week’s key events that could move the gold market are the announcement of the long-awaited tax reform plan and the U.S. Preliminary GDP report on Wednesday and the U.S. Non-Farm Payrolls report on Friday.

The key indicators of direction remain U.S. Treasury yields, the U.S. Dollar and demand for risky assets.