Price of Gold Fundamental Daily Forecast – Appetite for Risk Could Limit Gold’s Appeal as Safe-Haven Asset

Gold futures are trading flat-to-lower early Monday as investors try to determine the impact of the positive news about U.S.-China trade relations on investor appetite for risk and future decisions by the U.S. Federal Reserve. Both of these factors have been influencing gold prices lately. Furthermore, the news is light this week with the major market moving event likely to be the three days of testimony from U.S. Federal Reserve Chairman Jerome Powell.

At 0836 GMT, April Comex Gold is trading $1331.10, down $1.70 or -0.13%.

Trump Delays Additional China Tariffs

On Sunday, U.S. President Donald Trump said he is planning to delay a list of additional Chinese tariffs that were scheduled to begin on March 1. Trump didn’t provide much detail on the decision, but in a series of posts on Twitter, he cited “substantial progress” in bilateral talks between the two economic powerhouses.

In his Tweet over the weekend, Trump said, “I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues, including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues. As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, a Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”

In other news, China has committed to buying up to $1.2 trillion in U.S. goods, though as late as last week, the two sides were said to be far apart on issues concerning the forced transfer of intellectual property.

Appetite for Risk Limits Gold’s Upside

Gold could be pressured by increased demand for risky assets because it’s a non-yielding asset. Furthermore, traders who have been buying gold as a hedge against stock market weakness may be encouraged to reduce these positions if stocks continue to rise. This would put downside pressure on gold prices.

Impact on Fed Policy

Last week’s Fed minutes said policymakers noted tightening financial conditions and uncertainties surrounding the evolution of U.S. and foreign government policies. One would think that the ending of the trade dispute between the United States and China would have a positive effect on the U.S. and global economy, leading to the lifting of some of those fears.

This could bump up inflation while putting the Fed back on its path to raise interest rates. Higher rates could strengthen the U.S. Dollar, which would make dollar-denominated gold a less-desirable asset.

Daily Forecast

Steady-to-weaker Treasury yields and investors betting on a stock market correction have helped lift gold prices recently, which means prices could begin to weaken if yields firm and stocks continue to climb. The catalyst behind the weakness would be the lifting of economic uncertainties and the dampening of political risks.

We could see a short-term bump in gold prices because a stronger Chinese Yuan would drive the U.S. Dollar lower, increasing gold’s appeal to Chinese investors. However, the overall picture for gold could shift to bearish if a trade deal leads to higher Treasury yields, a stronger dollar and a continuation of the stock market rally.