Price of Gold Fundamental Daily Forecast – Appetite for Risk Will Determine Direction Today

The trend is up in gold, but all we’ve been seeing lately is investor willingness to buy the market on weakness. The true test of its strength will come when it tests the last main top at $1362.60.
James Hyerczyk
Comex Gold
Comex Gold

Gold futures spiked higher on Monday in reaction to a softer U.S. Dollar and concerns that China may have started a trade war when it raised tariffs on U.S. products. Buyers may have also taken advantage of a thinly traded market due to an extended Easter holiday in Europe. Flight-to-safety buying, fueled by a steep sell-off in U.S. equity markets also made gold an attractive asset.

June Comex Gold futures settled at $1346.90, up $19.60 or +1.48%.

Daily June Comex Gold

A long bias going into the start of the session may have also helped underpin the market. As reported on Friday by the Commodity Futures Trading Commission, gold speculators raised their net long position by 50,996 contracts to 172,834 contracts in the week to March 27.

The U.S. Dollar fell against most major currencies on Monday after China imposed extra tariffs on U.S. products, signaling the start of a trade war between two of the world’s largest economies.

The major U.S. stock indexes fell sharply in reaction to worries about a trade war, and fears that the tech industry is going to fall under the scrutiny of the federal government which usually means more regulation. Investors were also rattled after Trump linked his proposal to build a boarder wall between the U.S. and Mexico to ongoing NAFTA negotiations between the two countries.

In other news, U.S. factory activity slowed in March amid a decline in new orders, but growth in the manufacturing sector remained underpinned by strong domestic and global economies.

On Monday, the Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 59.3 last month from 60.8 in February. Economists were looking for a reading of 60.1.

Construction Spending edged up 0.1 percent in February after coming in unchanged in January. Economists had forecast construction spending accelerating 0.5 percent in February. Construction spending increased 3.0 percent on a year-on-year basis.

Forecast

The trend is up in gold, but all we’ve been seeing lately is investor willingness to buy the market on weakness. The true test of its strength will come when it tests the last main top at $1362.60. Taking out this level could generate the upside momentum needed to breakout over previous tops at $1369.60 and $1375.50. However, this will only occur if investors are willing to buy strength.

At 0735 GMT, June Comex Gold is trading $1342.40, down $4.50 or -0.33%.  The market is being pressured early by stable global equity markets.

The dollar is a little weaker, but gold traders are paying more attention to the appetite for risk. If appetite for risk returns today then gold is likely to feel pressure. If investors continue to shed risky assets then gold is likely to be underpinned.

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