Price of Gold Fundamental Weekly Forecast – Geopolitics and Economic Data Will Drive Price Action

Gold prices closed higher last week in reaction to a drop in U.S. Treasury yields and renewed geopolitical tensions Despite the strong performance, the trend remained down as rising U.S. rates are widely expected to continue to dampen demand for dollar-denominated assets like gold.

August Comex Gold futures finished the week at $1309.00, up $12.10 or +0.93%.

Gold was supported last week as U.S. government debt yields fell for the week after the Federal Reserve signaled it could allow inflation to run above its target and geopolitical fears pushed investors toward safer asset classes.

The Federal Reserve’s May meeting minutes released this week showed the central bank may be willing to let inflation run a little hotter that its two percent goal.

Gold short-sellers also covered positions, sending gold prices higher after President Trump expressed disappointment in the outcome of U.S. – China trade negotiations. Trump’s surprise cancellation of a meeting with North Korean leader Kim Jung Un also increased demand for gold as a safe-haven asset.

Keeping a lid on gold prices was the stronger U.S. Dollar which was supported by a drop in commodity-linked currencies, a plunge in the Euro due to brewing political turmoil in Italy and Spain, and concerns over the economy and Brexit in the U.K.

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Forecast

Geopolitics and economic data will be the price drivers this week in the gold market.

Reuters is reporting that American and North Korean officials met at the border between North and South Korea on Sunday in preparation for a possible North Korean-U.S. summit, as North Korea’s Kim Jong Un was cited as reaffirming his commitment to meet with U.S. President Donald Trump.

Both Pyongyang and Washington are pressing ahead on plans for a summit after Trump pulled out of the proposed June 12 meeting on Thursday, only to reconsider the decision the next day.

Trump also tweeted, “Our United States team has arrived in North Korea to make arrangements for the Summit between Kim Jong Un and myself. I truly believe North Korea has brilliant potential and will be a great economic and financial Nation one day. Kim Jong Un agrees with me on this. It will happen!”

Gold is likely to weaken if the meeting is reinstated. Investors who bought gold for safe haven reasons are likely to sell out of these positions if tensions over the matter ease.

Increased demand for the dollar and a recovery in Treasury yields will also encourage traders to sell gold.

This is also a big week for economic data. Monday is a U.S. holiday so there will be no trading. On Tuesday, investors will get the opportunity to react to the Conference Board’s Consumer Confidence report.

Wednesday will feature the ADP Non-Farm Employment Change report and Preliminary GDP.

The major report for the week is Friday’s U.S. Non-Farm Payrolls report. The Non-Farm Employment Change is expected to show the economy added 190K jobs in May. The Unemployment Rate is expected to remain at 3.9%. Average Hourly Earnings are expected to rise 0.3%.

ISM Manufacturing PMI is expected to come in at 58.2, up slightly from 57.3.

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