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James Hyerczyk
Comex Gold

Gold futures are trading flat on Wednesday shortly after the regular session opening. The price action suggests investor indecision and impending volatility. A stronger dollar and a mixed performance in the global equity markets is likely putting a lid on prices, while the market remains supported over the long-run due to the tremendous levels of fiscal and monetary stimulus injected in the global financial system.

At 12:48 GMT, June Comex Gold is trading $1687.50, up $3.80 or +0.23%.

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This week’s price action confirms that gold traders are being influenced by risk sentiment, but not the way some analysts want you to believe. Gold has been following the movement in the stock market nearly lockstep. That kills the argument that gold has been supported this week by safe-haven buying.

Besides the movement in the stock market and the U.S. Dollar, gold investors have probably been influenced by other outside factors such as the daily changes in the coronavirus numbers including the number of new cases and deaths. Other influences include the extended lockdowns, which are leading to the rolling out of further stimulus measures with Japan declaring a state of emergency while announcing a near $1 trillion stimulus package to soften the economic blow from the coronavirus.

Looking ahead, gold traders are likely to react to today’s release of the Federal Reserve Monetary Policy Minutes, which could offer clues as to further stimulus measures. The minutes could suggest further stimulus measures or other policy surprises that could trigger a volatile reaction in gold.

Thursday’s OPEC+ meeting outcome could also be a source of volatility. Some traders believe Saudi Arabia and Russia will hammer out a deal to curb production. Others are saying there will be no deal with the United States agreeing to limit production.

Daily Forecast

Over the short-run, the direction of the gold market will be controlled by investor risk appetite and safe-haven demand for the U.S. Dollar.

Gold could firm if stocks resume their rally and the dollar weakens as investors move money into riskier currencies. Gold prices are likely to weaken if stocks sell-off and investors move funds back into the U.S. Dollar.

Over the mid- to long-term, gold has tremendous upside potential due to quantitative easing and monetary stimulus efforts by global central banks.

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