Price of Gold Fundamental Weekly Forecast – Traders Watching Treasury Yields, Economic Data

Gold prices fell to a three-week low last week, pressured by a stronger U.S. Dollar. The dollar rose in reaction to hawkishly construed activity by the U.S. Federal Reserve.

August Comex Gold futures settled at $1256.50, down $14.90 or -1.17%.

Last week, the Fed raised interest rates, announced that additional rate hikes were still on the table and revealed its plan to begin trimming its balance sheet. These moves made the U.S. Dollar a more attractive investment while lowering demand for dollar-denominated gold.

Forecast

Gold could be influenced by short-term and long-term factors this week.

Short-term, the market is a little oversold and testing a key retracement zone on the daily chart which could prove to be strong enough to trigger a short-covering rally due to oversold technical conditions.

The key area to watch on the charts early this week is $1258.30 to $1248.70.

President Trump’s troubles could also underpin gold prices. Late last week, Trump announced that he was under investigation by a special prosecutor. This story could dominate the news next week which may encourage bearish traders to reconsider pressing the market lower.

Traders will also be watching U.S. economic reports closely. On Wednesday, the U.S. reports Existing Home Sales. On Friday, Flash Manufacturing PMI, Flash Services PMI and New Home Sales will be highlighted.

Several Fed members are also scheduled to speak including FOMC Member William Dudley, FOMC Member Charles Evans, FOMC Member Stanley Fischer and FOMC Member Robert Kaplan. Last week, Kaplan said he sees two more rate hikes for 2017.

Taking the Fed at its word, the upside for gold could be limited. The Fed mentioned another potential rate hike later this year, which is negative for gold.

The keys to whether gold can sustain a rally will be whether the geopolitical risks can offset the Fed’s plan to raise interest rates. A gold rally could pick up steam if Trump’s problems deepen. Weaker-than-expected economic data will also be supportive especially if the reports show lower growth and inflation.