Weekly Fundamental Gold Price Forecast: Lacking Luster, A Turning Point Arrives

 

Weekly Fundamental Gold Price Forecast: Lacking Luster, a Turning Point Arrives

WEEKLY FUNDAMENTAL GOLD PRICE FORECAST: NEUTRAL

  • Between investors seeking higher yielding and more growth-sensitive assets and a sense of disappointment over the Biden stimulus package, gold prices are struggling.
  • As discussed in the early-December weekly fundamental gold price forecast, “there has been a material regime change in the fundamental narrative for gold prices.” We’re now at a turning point in the regime change.
  • The IG Client Sentiment Index suggests that gold prices in USD-terms (XAU/USD) may continue their brief rebound.

GOLD PRICES WEEK IN REVIEW

Gold is supposed to benefit from rising fiscal deficits and debts, as well as political uncertainty, right? Well, the past week has certainly dealt dual blows to those perspectives, as the Biden fiscal stimulus plan and a siege on the US Capitol building did little to inspire traders to take the bull by the horns. Gold prices fell almost entirely across the board, and on the back of a resurgent DXY Index, gold in USD-terms (XAU/USD) dropped by -1.12%, compounding the prior week’s loss of -2.59% (notably, which produced a bearish outside engulfing candle on the weekly timeframe).

But it’s not just gold in USD-terms. Gold in GBP-terms (XAU/GBP) fell by -1.29% and is now down by -3.14% on the year. The only gold pair that produced a positive result on the week (+0.35%), gold in NZD-terms (XAU/NZD), is still down by -2.89% through the first two weeks of the year. It’s been rough sledding for gold prices, no matter how you measure.

SHIFTING FUNDAMENTALS HURTING GOLD IN SHORT-TERM

As discussed in the early-December weekly fundamental gold price forecast, “there has been a material regime change in the fundamental narrative for gold prices.” As the US economy regains its potential thanks to the COVID-19 vaccine development and distribution efforts, it increasingly becomes an uphill slog for gold prices as investors seeking higher yielding and more growth-sensitive assets.

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