Gold Prices Weekly Forecast: Consolidation Likely With Downward Bias
New York (June 18) Although gold prices will gain support if equity markets decline sharply, the net risks suggest gold will consolidate with a softer tone as confidence in global growth holds steady.
Gold spiked higher following weaker than expected US retail sales and CPI data with a peak near $1,280 per ounce, but there was a sharp reversal after the Fed statement and gold prices tested 3-week lows near $1,250 before finding some support.
There are no major central bank policy meetings during the week and no major US data releases, which may encourage a tone of consolidation across markets. There is, however, a risk that liquidity will fade, which could lead to erratic moves in asset prices.
With an absence of major US data releases during the week the existing home sales data on Wednesday and new home sales data on Friday will receive significant interest. The recent housing data has been relatively disappointing, especially with a significantly weaker than expected reading for housing starts and building permits released on Friday.
Weaker than expected data would reinforce concerns surrounding the outlook for construction and tend to undermine confidence in the dollar, which would provide support for gold.
The greater market risk is likely to be for stronger than expected data given the shift in expectations.
Jobless claims will also be released on Thursday, although there is unlikely to be a substantial impact.
The overall dollar trends will be an important influence with gold prices likely to come under further selling pressure if there is a further net advance for the US currency.
Developments in bond yields will also be an important focus during the week as markets continue to assess global central bank policies. If there are expectations that central bank will push policy normalisation, there will be scope for upward pressure on bond yields, which would tend to put downward pressure on gold prices.
Any retreat in bond yields would tend to underpin gold prices.
Trends in equity markets will be an important focus during the week, especially with some significant selling pressure on the US technology sector.
If equity markets come under heavy selling pressure, there will be scope for gold buying on defensive grounds.
US political factors will continue to be watched closely during the week as the special counsel’s investigation into Russian involvement in the US election continues. There have been reports that President Trump is under investigation for obstruction of justice and the investigation will continue to be monitored closely. If Trump appears to be jeopardy of being charged with obstruction of justice, there is the risk for fresh gold demand on deteriorating risk conditions.
Source: EconomicCalendar
