Yahoo Finance Price of Gold Fundamental Weekly Forecast – Pressured by Rate Hike Expectations, but Losses Limited by Political Turmoil
Gold finished lower, posting its biggest weekly decline in three weeks on pressure from a stronger U.S. Dollar and expectations that the U.S. Federal Reserve will raise interest rates this week for the first time this year. Losses were limited, however, by political turmoil in the White House, which fueled some demand for the safe-haven asset.
For the week, April Comex Gold futures settled at $1312.30, down $11.70 or -0.88%.
Also providing support and limiting losses was a report in the Washington Post which said Donald Trump’s national security adviser, H.R. McMaster, would become the latest senior official to leave his position. Additionally, the New York Times said U.S. Special Counsel Robert Mueller had issued a subpoena for documents related to Trump’s businesses.
Gold traders were also monitoring the diplomatic crisis between Russia and Britain over the poisoning of a former Russian double agent on U.S. soil. The U.K. expelled 23 Russian diplomats from the country, however, this was met by a similar move by the Russian government.
Most of the price action was driven by the movement in the U.S. Dollar. June U.S. Dollar Index futures settled at 89.797, up 0.157 or +0.18%.
In economic news, U.S. consumer inflation came in at 0.2%, meeting expectations but coming in well below the previous 0.5%. Core CPI also matched the 0.2% forecast, but came in below the previously reported 0.3%. The benign numbers probably mean the Fed will limit the number of rate hikes in 2018 to three.
Core Retail Sales disappointed investors with a 0.2% reading. The forecast called for an increase of 0.4%. The previous month was revised higher to 0.1%. Retail Sales were down 0.1%. Traders were looking for 0.3%. The previous month was revised higher to -0.1%.
Producer inflation rose 0.2%, exceeding expectations. Building permits were 1.30M versus a 1.32M forecast.
Forecast
The major market driving events this week will be the Federal Open Market Committee’s (FOMC) Economic Projections, FOMC Statement, Federal Funds Rate decision and FOMC Press Conference.
Traders in the Fed fund futures market are betting on a rate hike at the Fed’s meeting on March 21. This has already been priced into the market. Therefore, the key news that will move gold will be whether the FOMC members forecast two or three more rate hikes this year.
Only one more rate hike should be bullish for gold while three more rate hikes should be bearish for the precious metal. Two more rate hikes is what is expected, bringing a total of three by the end of the year.
Investors will also continue to monitor the turmoil in the White House and a possible announcement of tariffs against China. These events have the potential to create volatility which could drive up demand for safe haven gold.
This article was originally posted on FX Empire