Price of Gold Fundamental Daily Forecast – Dollar Driven Rally Continues

Gold was supported on Tuesday by a weaker U.S. Dollar, but gains were limited by increased demand for higher risk assets. Additionally, the end of the uncertainty created by the three-day government shutdown may have also caused a few speculators to lighten up on the long side.

April Comex Gold futures settled at $1341.70, up $4.80 or +0.36%.

Gold may have also been supported by a drop in U.S. Treasury yields. Some gold buyers are betting on a correction in the U.S. stock market while others are saying that a March rate hike by the Fed has already been priced into the market.

March U.S. Dollar Index futures hit a three-year low on Tuesday, led by the strength in the heavily weighted index component Euro. The single currency was boosted by a report which showed Euro Zone consumer confidence jumped much more than expected in January, underlining the strong momentum in the Euro Zone economy.

U.S. Treasury yields dropped on Tuesday in response to the end of the government shutdown. On Monday, the U.S. House of Representatives and the U.S. Senate reached an agreement to fund the government until February 8. The bill was later signed by President Trump. The lower yields may have contributed to the weakness in the U.S. Dollar.

The major U.S. stock indexes are in the midst of an earnings driven bull market and I see nothing that can derail the 18 month rally. Although it’s only been a little more than a week, quarterly earnings have been very positive this earnings season.

Forecast

Gold prices are breaking out to the upside early Wednesday in reaction to the weaker U.S. Dollar. Buyers took out the previous top at $1349.20. If the move creates enough upside momentum, we could see an eventual test of $1370.00 over the near-term.

The market is also being supported by concerns about potential trade wars due to action earlier in the week by President Trump.