Fundamental Forecast for Gold:Neutral

Gold prices rallied this week with the precious metal up more than 1.5% to trade at 1366 ahead of the New York close on Friday. The advance comes amid continued weakness in the greenback with the DXY (Dollar Index) down more than 2.2% to mark fresh three-year lows. However, with a big week of event risk on tap and prices coming off technical resistance, the rally may be vulnerable near-term heading into the close of the month.

Looking ahead to next week the central focus will shift on key U.S. event risk with the FOMC interest rate on Wednesday and the Non-Farm Payrolls report on Friday. This will be Janet Yellen’s final policy meeting as Chair before newly confirmed Jerome Powell takes the reins on February first. Market expectations are that the newly minted Federal Reserve Chairman will broadly carry on the central bank’s steady and measured pace of monetary tightening.

For gold, the events are likely to fuel added volatility after prices responded to technical resistance levels this week. Note that the January opening range break suggests a late month high in prices and while the broader picture remains constructive for bullion, heading into the February open there are a few key levels to keep in mind.