Price of Gold – Fundamental Forecast, March 6, 2017

Gold prices could trade steady-to-higher on Monday, now that Fed Chair Janet Yellen has put her stamp of approval on a Fed hike later this month. The price action on Friday seems to be indicating a “sell the rumor, buy the fact” situation.

April Comex Gold futures closed at $1226.50 on Friday, down $6.40 or -0.52%.

The market was pounded last week following a series of hawkish comments from several prominent Fed members early last week. Although the chances of a Fed hike trended higher all week from 30 percent, it was Yellen’s statement on Friday that drove the odds of a rate hike on March 15 to 90 percent.

Setting the table for a rate hike early in the week were New York Fed President William Dudley, San Francisco Fed President John Williams and Fed Governor Lael Brainard.

Dudley, a voting member of the FOMC, said that the case for tightening monetary policy “has become a lot more compelling”. Williams said that a rate increase is very much on the table for serious consideration given the economy at full employment and accelerating inflation. Brainard said an improving global economy and a solid U.S. recovery mean it will be “appropriate soon” for the Federal Reserve to raise U.S. interest rates.

Late Friday, Fed Chair Janet Yellen dropping a big hint that an interest rate hike is likely to happen at the Fed meeting later this month.

“We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect,” Yellen said at a speech in Chicago, according to prepared remarks.

In economic news, U.S. Final Services PMI came in as expected at 53.8. ISM Non-Manufacturing PMI beat the estimate with a read of 57.6.

In other news, hedge funds and money managers boosted their net long positions in COMEX gold to the highest in more than three months in the week to February 28, according to the U.S. Commodity Futures Trading Commission.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said tis holdings fell 0.56 percent to 840.58 tonnes on Friday.

In a late development that could underpin prices, North Korea fired four ballistic missiles early on Monday, three of which landed in Japan’s exclusive economic zone, Japanese Prime Minister Shinzo Abe said.

Gold traders will take their cues from the direction of the U.S. Dollar today and any repercussions from the North Korean incident.