Price of Gold Fundamental Weekly Forecast – Powell Comments, COVID-19, Stimulus Package to Drive Price Action

Gold rallied to levels last since in 2012, as renewed U.S.-China trade tensions added to concerns about a deep economic slump due to the coronavirus pandemic. Although we’re seeing limited physical demand and central bank buying lately, traders are finding very little reasons to sell gold in a time of unprecedented government fiscal stimulus and central bank monetary stimulus, and deteriorating relations between the world’s two largest economies.

Last week, June Comex gold settled at $1756.30, up $42.40 or +2.47%.

Much of the buying last week occurred after dire forecasts from White House task force coronavirus expert, Dr. Anthony Fauci and U.S. Federal Reserve Chairman Jerome Powell.

On Tuesday, Dr. Fauci warned that relaxing stay-at-home rules too quickly could bring more ‘suffering and death”. On Wednesday, Chairman Powell warned of an “extended period” of weak economic growth.

Other news that contributed to the bleak economic scenario that is making investors reluctant to take risk, while contributing to the uncertainty, was renewed friction between the United States and China over the outbreak, with President Donald Trump suggesting he could even cut ties with Beijing.

Further underpinning the damage inflicted by the outbreak was the latest U.S. retail sales data that showed a second straight month of record declines in April.

Weekly Forecast

If last week’s reaction to Federal Reserve Chairman Powell was any indication that we’re likely to see some volatility this week with Powell offering his comments on the economy on Sunday, May 17, Tuesday, May 19 and Thursday, May 21.

I don’t think Powell is going to waver too much from last week’s dire forecast so his comments are not likely to create weakness.

What could encourage investors to trim some of their bullish gold positions would be continuing improvement in the coronavirus numbers.

Some of the bullishness is also being fueled by the possibility of additional fiscal stimulus from the U.S. government. Last week, the mostly Democratic U.S. House of Representatives approved a $3 trillion stimulus package. Although the mostly Republican Senate is expected to vote against the stimulus package, further negotiations could lead to a compromise that would provide additional support for gold.