Price of Gold Fundamental Daily Forecast – Bullish Traders Waiting for Next Drop in Treasury Yields

Gold futures are trading slightly lower shortly after the New York opening on Friday. The inside trading range and relatively low volume suggests investor indecision and impending volatility. Traders seem to be trying to regroup following Wednesday’s volatile trading session while waiting for the next catalyst.

At 12:23 GMT, August Comex gold futures are trading 1885.80, up $1.90 or +0.10%.

The bias remains to the upside with the U.S. Dollar testing multi-month lows, but stabilizing Treasury yields seems to have sucked out the volatility. The next major move in U.S. Treasury yields will determine whether gold prices surge to the upside, or pullback into support.

The price action suggests gold investors are not too concerned about monetary tightening over the short-run. There was a little scare on Wednesday after minutes from the Fed’s April meeting mentioned possible future discussions on paring stimulus, but gold investors seem to have gotten over that revelation.

Treasury Yields Drift Lower with Focus on Economic Data

U.S. Treasury yields drifted lower early on Friday, with Markit’s May Purchasing Managers’ Index due out later in the morning.

The yield on the benchmark 10-year Treasury note fell to 1.618% at 07:45 GMT. The yield on the 30-year Treasury bond dipped to 2.323%.

The May Markit PMI, which tracks economic trends in the manufacturing and service sectors, is due out at 13:45 GMT.

Existing Home Sales data for April is then due to be released at 14:00 GMT.

Gold was underpinned on Thursday as the 10-year Treasury yield eased back after a brief jump to top 1.68% on Wednesday, following the release of policy meeting minutes from the Federal Reserve.

The central bank’s Federal Open Market Committee hinted it would consider discussing a plan to taper its asset purchase if the economy continued to recover rapidly. However, the Fed stuck to the line that it saw rising inflation as transitory.

Daily Outlook

Once again, the direction of gold prices will be determined by the direction of U.S. Treasury yields and the U.S. Dollar. If both continue to weaken then look for gold to test the long-term 50% level at $1899.20.

Overtaking $1899.20 will indicate the buying is getting stronger. The daily chart indicates there is no visible resistance until $1951.30.

That being said, trader reaction to $1899.20 will set the tone.