Price of Gold Fundamental Daily Forecast – Prices Likely to Weaken as Investors Seek Value

Gold futures are under pressure on Monday shortly after the cash market opening as rising Treasury yields and demand for risky assets has made gold a less-desirable asset since it pays neither interest nor a dividend to hold. The catalyst behind the selling pressure is general optimism in the financial markets ahead of the signing of an interim U.S.-China trade deal and the lack of further escalation in the conflict between the United States and Iran.

At 14:17 GMT, February Comex gold is trading $1555.30, down $4.80 or -0.31%.

US-China Trade Deal Signing

On Wednesday, U.S. President Donald Trump and Chinese officials are expected to sign the long-awaited phase one trade deal between the two economic powerhouses. China’s Vice Premier Liu He, who leads the Chinese negotiation team in the trade talks, is set to visit Washington from today, the country’s commerce ministry said.

The deal will involve some tariff relief, increased Chinese purchases of U.S. agricultural goods and changes to intellectual property and technology rules. Meanwhile, Washington and Beijing have agreed to hold semiannual talks in targeting to resolve disputes and push for reforms, according to a report by the Wall Street Journal, citing sources.

In other news, U.S. Treasury Secretary Steven Mnuchin said on Sunday China’s commitments in the initial deal were not changed during the translation process and will be released as the document is signed.

Money Flowing Back into Higher-Yielding Stocks

Last week, bullion rose to a near 7-year peak after a U.S. drone strike killed a top Iranian commander in Baghdad and Iran launched missiles against U.S. airbases in Iraq in retaliation. The rally, however, faded with a further military escalation in the region.

The U.S. imposed more sanctions on Iran on Friday and vowed to tighten the economic screws if Tehran continued “terrorist” acts or pursued a nuclear bomb.

The easing of tensions between the United States and China due to these events is being reflected in a drop in investor sentiment. Speculators have calmed and booking profits. Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust fell 0.9% to 874.52 tonnes on Friday, their lowest since September 16.

Furthermore, open interest in the futures market did not jump higher along with prices last week, suggesting professionals were not aggressively adding to established long positions.

Daily Forecast

Our work suggests February Comex gold is headed into the main retracement zone at $1533.20 to $1514.30. This is a value area. If the professionals see upside potential then they are likely to start buying again on a test of this zone.