Daily Gold Fundamental Forecast February 20, 2017
Gold prices moved higher on political uncertainty in the U.S. and Europe early Friday, but sellers came in as the market approached its high from earlier in the month amid profit-taking ahead of the long U.S. holiday week-end. A rebound in the U.S. Dollar also pressured the dollar-denominated gold market.
April Comex Gold closed at $1239.10, up $6.00 or +0.49%.
Volume is expected to be light on Monday due to the U.S. President’s Day bank holiday. This means that if you choose to trade, you should be aware of the possibility of volatility spikes. The key to trading a thin session is to avoid getting caught in a trap on the wrong side of the market.
Currently, the support for gold is being driven by concerns over Trump’s policies, as well as elections in the Netherlands, France and German this year.
However, dealers are still exhibiting caution about running the market too much higher as the debate continues over whether the Fed will raise rates in March.
Early last week, robust inflation data suggested the economy may be ready for a rate hike, and this notion was supported by Fed Chair Janet Yellen on her first day of testimony before Congress. However, by the second day, she didn’t express the same hawkish tone which may have contributed to the weaker dollar and higher gold prices.
Look for a mostly sideways trade today because the U.S. Treasury markets will be closed. Gold is very sensitive to the movement in interest rates and without the cash market, gold traders may be rudderless. If there is a volatility spike or two, it will be because of the light volume.
Traders should also watch Europe for any developments from France regarding the elections. This event is likely to contribute to increased volatility also.