Price of Gold Fundamental Daily Forecast – Bullish Traders Expect Rate Cuts, Hoping for Fiscal Stimulus

Gold is trading steady to better for a second session as it tries to recover from last week’s $82.00 decline. Volume is on the light-side early Tuesday as investors await the outcome of a conference call between the major central banks that could lead to the announcement of monetary and fiscal stimulus – two factors that tend to be bullish for gold prices.

At 10:37 GMT, April Comex gold is trading $1599.80, up $5.00 or +0.31%.

On Monday, traders pushed the chances of a 50-basis point rate cut by the U.S. Federal Reserve to 100-percent. The European Central Bank (ECB) also signaled it was prepared to trim rates in an effort to fight the economic impact of the coronavirus. Early Tuesday the Reserve Bank of Australia (RBA) cut its cash rate by 25-basis points although some traders were hoping for an even larger cut.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the U.S. Dollar, making dollar-denominated gold a more desirable asset.

In other news, benchmark U.S. 10-year Treasury yields hovered near record lows, a positive for gold prices. The U.S. Dollar edged lower, but a sharp rise in global equity markets reduced gold’s appeal as an alternative investment. Furthermore, gold investors are still licking their wounds after last week’s plunge was fueled by equity investors selling their positions in gold to meet market calls.

On the economic front, data released on Monday showed U.S. factory manufacturing activity slowed in February as new orders contracted, reflecting worries about supply chain disruptions due to the virus outbreak and underscoring the need for an interest rate cut.

Daily Forecast

As long as the global stock indexes trade steady to higher, the announcement of monetary and fiscal stimulus by the central banks should be enough to underpin gold prices. However, don’t expect gold investors to be in a hurry to rebuild their long positions. Recent price activity has shown that slow rallies in gold have been more constructive than rapid rallies.

Prices could turn south in a hurry on Tuesday if the central bankers disappoint. Most traders are looking for monetary and fiscal stimulus. Monetary stimulus or rate cuts should be easy. However, traders will be disappointed if the fiscal stimulus underwhelms.