The gold market continued to frustrate bullish investors last week as even dovish Fed minutes, falling Treasury yields and a weaker U.S. Dollar couldn’t fuel a continuation of the rally from the previous week.

February Comex Gold futures settled at $1291.80, down $9.10 or -0.70%.

Gains were probably limited by strong demand for higher-yielding assets and expectations of further tightening by the U.S. in December. The chart pattern suggests there is just enough buying coming in to keep the market relevant, but not enough to fuel a breakout to the upside. Low holiday volume may have also kept many of the major players are the sidelines.

The price action last week was primary driven by the Fed minutes from its latest monetary policy meeting in November. The minutes revealed that central bank officials were largely optimistic about the economy but also worried that financial market prices are out of balance and posing a threat to the economy.

According to the minutes, nearly all Federal Open Market Committee members expressed positive views on growth – specifically the labor market, consumer spending and manufacturing.

They did have some disagreements on the pace of inflation, and even talked about changing the Fed’s approach to price stability, the sentiment otherwise was largely positive.

The discussion over the pace of inflation was most important. Although a December rate hike is a given, financial futures traders have already cut the number of rate hikes in 2018 from three to two. This news has been driving U.S. Treasury yields and the U.S. Dollar lower, but it has had almost no effect on gold prices. This is probably because of increased demand for higher risk assets which has driven the major U.S. stock indexes to new all-time highs.

Forecast

This week, gold investors will continue to monitor Treasury yields, the U.S. Dollar and U.S. stock indexes. Given last week’s price action, it seems the direction of U.S. equity markets will dictate the direction of gold prices this week. Gold prices are likely to be capped if stocks continue to reach all-time highs. Gold prices should rally if there is a meaningful sell-off in the stock market.

Gold could also move sharply higher if the U.S. Dollar spikes lower.

On the economic front, traders will get the opportunity to react to major reports on consumer confidence, Preliminary GDP and ISM Manufacturing PMI>

Gold traders will be most interested in what retiring Fed Chair Janet Yellen has to say about the Fed minutes on Wednesday, November 29. Yellen is scheduled to testify before Congress and she may be asked to explain her concerns over sluggish inflation.