Price of Gold Fundamental Daily Forecast – Weaker Dollar, Falling Yields Supporting Gold

Gold prices are trading higher for a second day, helped by a weaker U.S. Dollar and lower U.S. Treasury yields.

August Comex gold is trading $1253.90, up $8.10 or +0.65%.

The primary driver of the rally seems to be the flattening of the longer-dated U.S. Treasury curve. Treasury prices were mostly lower on Wednesday as investors reacted to the housing data and another plunge in oil prices.

The yield on the benchmark 10-year Treasury note was 2.153 percent, while the yield on the 30-year Treasury bond was slightly lower at 2.72 percent.

Falling oil prices are also helping to boost gold prices because they are weighing heavily on inflation. If oil prices continue to fall then expect inflation to remain below the Fed’s 2.0 percent target. This would raise doubts about the central bank’s ability to raise interest rates later in the year.

In other news, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.04 percent to 853.89 tonnes on Wednesday.

In economic news, U.S. Existing Home Sales came in better than expected at 5.62 million units. Investors were pricing in a 5.54 million unit increase.

Forecast

The momentum in the gold market has shifted to the upside with the slight change in the fundamentals. Shorts are covering and bullish speculators are coming in to buy gold as they react to the possibility the Fed may be finished with its rate hikes this year.

On Thursday, investors will get the opportunity to react to Weekly Unemployment Claims, the Home Price Index and the Conference Board’s Leading Index. FOMC Member Jerome Powell is also scheduled to speak.

The unemployment claims report is expected to come in at 241K, slightly above the previous 237K. The HPI report is expected to show a rise of 0.4%, down slightly from 0.6%. The CB Leading Index should show a rise of 0.4%, up slightly from 0.3%.

FOMC Member Powell may make comments about inflation that affect the U.S. Dollar. If the dollar falls then this should be supportive for gold prices.