Price of Gold Fundamental Daily Forecast – Positive Brexit News Underpining Prices as Dollar Tumbles

Gold prices are soaring on Thursday in response to a decline in the U.S. Dollar against a basket of major currencies. The weakness in the dollar is being primarily driven by a strong recovery in the Euro, which hovered around its August bottom at 1.1301 for most of the week before turning sharply higher overnight.

At 1017 GMT, December Comex Gold futures are trading $1225.60, up $10.60 or +0.86%.

The catalyst which turned the Euro and consequently the gold market around was the news that British Prime Minister Theresa May had struck a tentative deal with the European Union that would give UK financial services companies continued access to European markets after Brexit, the Times reported early Thursday.

In other fundamental news, the U.S. Mint sold 22,000 ounces of American Eagle gold coins in October, up 7.3 percent from the previous month, according to the latest data.

Additionally, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.12 percent to 754.06 tonnes on Wednesday from 754.94 tonnes on Tuesday.

Forecast

We can’t call the jump in gold prices a total surprise. From a technical standpoint, the market posted a 50% to 61.8% correction of its $1184.50 to $1246.00 range at $1215.30 to $1208.00. Since this zone represented value after the recent $60 rally, some buyers stepped in on Wednesday at $1213.40 to stop the price slide and the aggressive speculative bet paid-off with the Brexit news.

The biggest concern for gold bulls moving forward should be finding the catalyst that will trigger a rally through last week’s high at $1246.00.

The key area to watch is $1229.70 to $1233.50. Trader reaction to this zone will tell us if the bulls have retaken control, or if the bears are controlling the price action.

Factors that could weigh on gold are increased demand for risky assets, firmer Treasury yields and a stronger U.S. Dollar. Factors that could underpin prices include a weaker Dollar, flat to lower yields, or another volatile sell-off in the U.S. equity markets.

Despite Thursday’s early surge, the rally is likely to stall if buyers fail to drive the market through $1233.50.