Price of Gold Fundamental Daily Forecast – Steep Dollar Plunge Should Spike Gold Prices

Gold prices are testing a 2 ½ week high, driven by a weaker U.S. Dollar and yesterday’s U.S. inflation report that showed a faster than expected rise in consumer prices.

At 1008 GMT, April Comex Gold futures are trading $1356.80, down $1.20 or -0.09%.

On Wednesday, the government reported that consumer prices rose more than expected in January as Americans paid more for gasoline, rental accommodation and healthcare. This was enough to fuel gold’s biggest one-day percentage gain since May 2017.

A recovery in broader risk sentiment was seen weighing on the U.S. Dollar, which had gained during the market turmoil earlier in the month. This helped make gold a more attractive investment.

In other news, the Commerce Department said on Wednesday that U.S. retail sales decreased 0.3 percent last month, the largest decline since February 2017, as households cut back on purchases of motor vehicles and building materials.

Also boosting gold was a report of a sharp rise in economic growth in the Euro Zone. According to the EI statistics office Eurostat, Euro Zone industrial production rose 0.4 percent month-on-month for a 5.2 percent year-on-year gain.

Forecast

 

It’s only one report and there is another U.S. consumer inflation report before the Fed meets in March, but the news should solidify the need for another rate hike at that time and it may even increase the urgency for the ECB to move forward with its plan to cut stimulus, paving the way to a rate hike sooner than expected.

In the meantime, gold investors are going to continue to react to the direction of the U.S. Dollar, which is dropping fast enough to challenge its December 16, 2014 bottom at 88.067. Taking out this level with conviction is likely to fuel a breakout in gold above the recent top at $1370.50 and could lead to a challenge of the psychological $1400.00 level over the near-term.