Price of Gold Fundamental Daily Forecast – Brexit Uncertainties Should Keep Gold Bid

Gold is trading higher on Wednesday, continuing the move triggered by a breakout to the upside the previous session. The catalysts behind the rally are safe-haven buying related to concerns over Brexit and a plunge in U.S. Treasury yields which drove the U.S. Dollar lower, while increasing demand for dollar-denominated gold. Technical factors also played a role in the market’s strength with prices surging to a two-week high after breaching the psychological $1300 level.

At 07:36 GMT, April Comex gold settled at $1304.50, up $6.40 or +0.49%.

Gold actually started to firm early Tuesday following the release of mixed report on U.S. consumer inflation. This news drove U.S. government debt yields sharply lower, making the U.S. Dollar a less-attractive assets. A low inflation reading means the U.S. Federal Reserve is likely to remain “patient” when raising interest rates. This puts pressure on yields and the dollar, making gold a more attractive asset.

According to the Labor Department, U.S. consumer prices rose for the first time in four months in February, but the pace of the increase was modest, resulting in the smallest annual gain in nearly 2-1/2 years.

The Consumer Price Index (CPI) increased 0.2 percent, boosted by gains in the cost of food, gasoline and rents. The CPI had been unchanged for three straight months.

In the 12 months through February, the CPI rose 1.5 percent, the smallest gain since September 2016. The CPI increased 1.6 percent on a year-on-year basis in January.

Excluding the volatile food and energy components, the CPI edged up 0.1 percent, the smallest increase since August 2018. The so-called core CPI had increased by 0.2 percent for five straight months.

In the 12 months through February, the core CPI rose 2.1 percent. The core CPI had increased by 2.2 percent for three consecutive months on an annual basis. Economists had forecast the CPI and the core CPI edging up 0.2 percent in February.

Daily Forecast

Today’s early rally is being driven by dampened demand for risky assets as investors express concerns over a possible “hard Brexit” deal. This is driving them into safe-haven gold.

Late Tuesday, the British Parliament rejected Prime Minister Theresa May’s deal to quit the European Union for a second time, triggering a wave of uncertainties just weeks before the planned departure date on March 29. The British Parliament will vote later in the day on whether to back a no-deal Brexit, and if that fails, a further vote on Thursday will decide whether to extend the Brexit deadline.

Gold is likely to remain bid until all votes are exhausted.

In the U.S., traders will get the opportunity to react to the latest data on Core Durable Goods Orders, Producer Price Inflation and Construction Spending.

Core Durable Goods Orders are forecast to have risen 0.1%, Durable Goods Orders are predicted to have fallen 0.5%. PPI and Core PPI are expected to have risen 0.2%. Construction Spending is forecast to have risen 0.4%.