Gold Bullish: What Are You Waiting For?

By: Mai Fadzilah

Gold Forecast for May 2018

Are you bullish or bearish about Gold? In this article, we try to forecast the movement of Gold for month of May 2018. Understanding the price movement of gold will help you in trading Gold especially if you are buying leverage ETF's such as NUGT or Dust shares. 

Our Take for Gold in May 2018

Gold will be strong in the first 2 to 3 weeks in May (1 May to 19 May 2018) before dropping as market prepares for June Fed meeting on 12 June 2018. 

Why May 2018 is Good For Gold Traders

  1. Trade War Concerns - Nafta & China Retaliation

  2. Muller Investigation could be even more damaging. Rumours claims that Muller may subpoena Trump. 

  3. Improved Nafta Deal that favours US. Nafta partners may announce a preliminary deal on the trade pact at a summit in Peru

  4. Gold Miners Earnings -  The market is not impressed with miners over their earnings. Barrick Gold, Goldcorp and Newmont have all seen their stock prices drop after reporting their earnings. Two more miners will be reporing soon. Kinross on 1 May and AngloGold on 8 May. We doubt they will have any impact of Gold movement though. 

What Can Go Wrong For Gold Traders in May 2018
High Inflation will cause Gold Prices to go down in the short term while US Dollars is begining to gain strength from end April 2018 

  1. There is still not enough panic in the market as of 1 May 2018. Especially with the peace making deal between North Korea and South Korea.

  2. US Dollar Gains. 10-year U.S. bond yields shot above 3 percent on 15 May 2018 (which see Gold dropping by 1.8% in a single day), sending borrowing costs higher in a number of other countries. A higher U.S. interest rates tend to boost the dollar and bond yields, making greenback-denominated gold more expensive for holders of other currencies and denting the appeal of non-yielding assets such as bullion.

  3. Fed Interest Rate Meeting on 12 & 13 June with fed chairman. The market is anticipating a rate hike of 0.25pts (0.25%) in interest rates, making this the second rate hike for 2018. In total, the market is expecting to have 4 rate hikes this year adding further pressure to Gold prices. 

  4. US Wages is now in steep climb. US private sector grew at the fastest pace from Jan to April 2018. Official figures shows a 2.9% growth in private sector wages. These new numbers will give fed officials more validation that a tumbling unemployment will push wages up. To counter this, fed officials may have to raise interest rates more than 3 times this year.

  5. Low unemployment rate is getting real. This will lead to higher inflation. The US unemployment rate is currently at a 17 year low of 4.1 percent with the labor market considered to be near or full employment. In the week ending April 2018, initial jobless claims is 211,000. An increase of 2,000 from previous week of 209,000.
    See Jobless Claims Report by US Dept of Labour

  6. US Productivity Rose 0.7% vrs 0.9%. From Jan 2018 to Mar 2018, nonfarm productivity rose by 0.7%. This jump is compensation further support views that inflation pressures are building up. US Department of Labour.

  7. Crude Oil is Rising especially after Donald trump withdrew from the Iran nuclear deal and reimpose sanctions on oil exports. Oil further spiked when Israel said it has new and conclusive evidence to prove that Iran has been hiding nuclear weapons activity. 

    The rising cost of crude is hurting businesses due to rising cost of its their oil-based raw materials. Goodyear tie and rubber reported a 53% drop in profits. 3M has also warned that their transport and logistics cost are running higher and aims to pass those costs back to their customers. This will lead to higher prices for many business especially for the next earnings and this could mean bad news for Gold including Gold miners.

Dates to Take Note for May 2018. 
These 2 key dates may swing price of gold in the shorterm especially if you are trading Nugt. 

  1. 15 May 2018 - The U.S. will hold a public hearing in Washington on its proposed tariffs against China.

  2. Late May 2018
    The Treasury Department must hand over proposed measures to address China’s investment practices involving the acquisition of sensitive technologies.

Dates & Trends in June 2018

  1. 1 June 2018 - Trump has push back tarriff reliefs to 1 June 2018. U.S. steel and aluminum tariffs relief lapses for Canada, Mexico, the European Union, Brazil and Argentina on 1 June 2018. Should the tariff be implemented, Gold will go up. 

  2. Fed Meeting on 12 June. 

2018 U.S. midterm elections fast facts. 

Historically, this is how stocks behave during U.S midterm elections

  1. S&P 500 returns have been muted during the last 11 pre-election summers.

  2. Stocks lose on average of 1% in the May-September period of a midterm election year.

  3. Average returns during a post-election October-to-December rally are 8%.

This article is updated weekly, Last updated 16 May 2018
Disclaimer, pls do your own research when trading. We or our partners including the author will not be held responsible for any losses you incurred. 

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