Price of Gold Fundamental Weekly Forecast – Will Cyber-attacks Become New Catalyst for Rally?

Gold futures finished slightly higher last week after falling to its lowest level since March 15 in a lackluster trade as bullish investors searched for the next major catalyst to drive up speculative demand.

June Comex Gold settled the week at $1227.70, up $0.80 or +0.07%.

Gold prices were under pressure early in the week after the outcome of the French presidential election was released. The victory by Emmanuel Macron triggered the sell-off after speculators, betting on an upset win by right-wing candidate Marine Le Pen, liquidated their positions. A stronger U.S. Dollar, rising Treasury yields and firm U.S. equity markets also helped put a lid on any rallies.

Gold bottomed for the week at $1214.30 on May 9 and inched higher the remainder of the week on concerns about a possible North Korea missile test and the abrupt firing of FBI Director James Comey by President Donald Trump. Weaker-than-expected U.S. economic data also helped support gold prices late in the week.

In economic news, the good news for the U.S. economy was higher than expected producer inflation data and better-than-expected weekly unemployment claims.

Gold prices were supported by weaker-than-expected consumer inflation and retail sales. The best support was provided by the retail sales number because it raised concerns about the number of possible rate hikes by the Fed in 2017.

Forecast

The technical picture for gold looked a little better at the end of the week than it did in the beginning. Although it closed only marginally higher last week, it did recover enough from early in the week weakness to post a potentially bullish closing price reversal bottom, technical chart pattern. This pattern suggests that the buying may be greater than the selling at current price levels.

There wasn’t any strong evidence of speculative buying so we have to assume the move was fueled by profit-taking and short-covering. If buyers come through next week then the chart pattern will be confirmed and we should see further upside action.

Although Friday’s CPI and retail sales data reduced the chances of the number of Fed rate hikes this year to 49 percent, they were not weak enough to take the possibility of a June rate hike off the table. Concerns over rising interest rates may put a lid on gold prices this week.

The unfolding of the political drama over Trump’s firing of the FBI director is likely to be the main driver of the price action this week. Currently, investors feel that there is enough there to delay Trump’s economic agenda, which includes tax reform, deregulation and infrastructure spending.

Look for gold to rally if the situation escalates into something bigger than it is, the firing of the FBI Director. Any news that suggests the Trump campaign conspired with the Russians to get Trump elected will also be bullish for gold.

North Korea is the wild card, especially since its U.K. ambassador said last week that the rogue nation was planning a sixth ballistic missile test.

I’m not sure how it’s going to play out, but Friday’s global cyber-attack may give investors an excuse to sell risky assets and park their money in safe haven gold.

It’s a light schedule this week as far as economic data is concerned. The major reports are building permits and weekly unemployment claims.

Other reports include housing starts, capacity utilization, industrial production and the Philly Fed Manufacturing Index.