Fundamental Forecast for Gold: Bullish
For the first time in five weeks, gold prices finished the week higher. One development from this past week that pulled the yellow metal higher was the Fed interest rate expectations slowing down into the remainder of 2017.
Two weeks ago, Fed Fund futures were predicting a 57% chance of two rates hikes prior to the end of 2017. Last week, that prediction fell to 51% and this week it fell further to 45%. This less aggressive rate hike path is causing the US Dollar to weaken and for gold prices to strengthen.
This week, we get some further insight from the Fed as their May 3 meeting minutes are released. Any surprises in the minutes may cause a reaction for gold if it alters the rate hike path. Later in the week on Friday, we have US GDP and US Durable Goods releases, which could create some short term volatility as well.
From a technical perspective, gold prices continue to be stuck in a consolidation period. We anticipate gold prices will likely hold above $1214 for an eventual retest of $1300. One pattern we are following implies continued sideways action between $1214 and $1280 for the next couple of weeks before prices break higher. Perhaps the resistance trend line noted below holds prices down. Even if gold prices are suppressed, we anticipate eventual support to emerge above $1214.
Other technical signals continue to be a positive signal for bulls. For example, gold prices and the daily Ichimoku lagging line (purple line) continue to print above the Ichimoku cloud. We have maintained a longer term bullish bias since December 29 when we argued that Gold prices could gain in the face of raising rates.
What is the quarterly outlook for Gold? Find out with our quarterly trading guide.
---Written by Jeremy Wagner, CEWA-M
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