Fundamental Forecast for Gold: Bullish

Gold prices rallied for a third consecutive week with the precious metal up 1.8% to trade at 1349 ahead of the New York close on Friday. The advance comes amid continued weakness in the greenback with the DXY dropping to levels not seen since January of 2015. The march to fresh yearly highs been further fueled by the ongoing geopolitical tensions with North Korea and diminishing expectations for a Fed rate hike in December. But can the rally continue? The charts say yes, but not before a slight interruption.

Highlighting the economic docket next week will be the release of the August U.S. Consumer Price Index (CPI) followed by retail sales figures. Keep in mind next week is the blackout period for Fed speakers ahead of the upcoming quarterly FOMC rate decision on September 20th. While headline inflation is expected to uptick to 1.8% y/y, the core rate is expected to downtick to 1.6%. With the Fed essentially waiting on inflation to pick up, traders will be assessing the implications of a December rate-hike with markets now pricing less than a 30% chance the central bank will move on rates.

While the rally in gold has been quite impressive, prices are now approaching some longer-term objectives and even though the broader focus remains constructive, heading into next week the risk remains for some corrective price action before heading higher.