Gold Fundamental Forecast – February 27, 2017
Gold futures closed higher on Friday as investors continued to react to the Fed’s minutes which they determined were less-hawkish than expected and probably meant the central bank would not raise rates in March. Investors were also reacting to comments from Treasury Secretary Steve Mnuchin, who suggested on Thursday that President Trump’s economic policies would not likely be able to take effect until at least August.
Both events helped drive U.S. Treasury yields lower, pressuring the U.S. Dollar while helping to boost demand for dollar-denominated gold.
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April Comex gold closed at $1258.30, up $6.90 or +0.55%.
In other news, hedge funds and money managers raised their net long position in COMEX gold to the highest in nearly three months during the week to February 21. Speculators raised their net long position in bullion by 14,482 to 82,464 lots.
Australian gold output reached a 17-year high of 298 tonnes in 2016 as rising bullion prices drove mining companies to dig deeper, according to a sector survey.
Finally, holdings in the SPDR Gold Trust ETF have risen more than 5 percent this month on geopolitical risk.
Forecast
We could see a rangebound trade on Monday as investors prepare for U.S. President Donald Trump’s policy speech to a joint session of Congress on Tuesday night where he is expected to provide clues on his plans to cut taxes.
Traders will also have the opportunity to react to a slew of U.S. economic data including Durable Goods. Core Durable Goods are expected to rise 0.5% and Durable Goods Orders by 1.6%.
Minor reports include Pending Home Sales, which are expected to increase by 1.1%, down from the previous 1.6%.
Dallas Fed President Robert Kaplan is also expected to speak on Monday. He is considered a hawk so he may try to build a case for a March rate hike, which could help put a lid on gold prices. Recently, Kaplan revealed that the Fed should leave its options open to a rate hike in March.
He also said that the Fed should be tactical in taking opportunities to hike. Furthermore, he said Trump’s policies should focus on sustainable growth. Finally, he said that as the year unfolds, he does not want the Fed to get behind the curve.