Price of Gold Fundamental Weekly Price Forecast – Bulls Need Dovish Fed Minutes to Sustain Upside Bias

Gold futures finished nearly flat last week as investors renewed their struggle with the U.S. Dollar. The week started out promising for gold bulls as investors reacted to a weaker dollar. The greenback was driven lower by speculators betting on dampening inflation concerns and somewhat dovish comments from Fed officials saying the central bank was nearing a neutral monetary policy.

For the week, December Comex Gold futures settled at $1223.20, up $0.20 or +0.02%.

Gold looks like it wants to move higher, but it needs help from a weaker dollar to sustain the move and to generate the upside momentum needed to drive it out of its nearly four-month trading range.

For much of the year, the dollar was attracting buyers because of rising interest rates. This was putting pressure on dollar-denominated gold. Although the dollar has continued to forge higher, demand for gold has also been increasing since mid-August as investors began to price in the possibility of a slowdown in the pace of U.S. Federal Reserve rate hikes.

This notion was supported about two weeks ago when relatively flat monthly U.S. consumer inflation data suggested that inflation may not be overheating as previously thought by the Fed. Furthermore, the steep drop in crude oil and gasoline prices is expected to weigh on inflation.

Gold was also supported by potentially dovish comments from two Fed officials who suggested the Fed may have to consider slowing the pace of rate hikes, bringing the central bank closer to a neutral state. This occurs when the economy needs neither low rates to stimulus growth nor higher rates to prevent runaway inflation.

Last week, gold was underpinned by weaker than expected durable goods data, lower than expected consumer confidence and an unexpected rise in weekly jobless claims. However, the potentially bullish news was offset by another steep drop in U.S. equity markets, which drove up demand for the safe-haven U.S. Dollar. Until this cycle stops, gold is going to have a hard time sustaining rallies.

Forecast

Traders should expect much of the same type of trading this week unless economic forces change investor sentiment. Essentially bearish U.S. economic data will be good for gold prices because it will reduce the chances of aggressive rate hikes by the Fed. However, the data can’t be so bad as to cause the stock market to weaken substantially.

I think the dollar and gold can easily absorb a slow and steady decline in stocks, but investors and traders seem to get a little too agitated by heightened volatility.

This week, gold price are likely to be influenced by U.S. economic data including the Conference Board’s Consumer Confidence report, Preliminary GDP and the FOMC Meeting Minutes. Additionally, Fed Chair Jerome Powell is scheduled to speak.