Price of Gold Fundamental Daily Forecast – Bulls Waiting for Perfect Storm of Lower Yields, Falling Stock Prices
Gold futures are trading higher on Wednesday, but inside the previous day’s range for a second day. The price action indicates investor indecision and impending volatility. Keeping a lid on the market has been increasing appetite for risk. Supporting the market is the steep drop in Treasury yields. Traders are saying that a firm U.S. Dollar is also offsetting potential gains being fueled by fears of a possible recession in the United States.
At 11:07 GMT, June Comex gold is trading $1324.40, up $3.00 or +0.21%.
The plunge in Treasury yields along with weakening U.S. economic data appears to be enough to provide support for gold prices. This is leading to steady hedge demand for gold. What this market is lacking is a catalyst to trigger a breakout to the upside. Conventional wisdom tells us that a weaker U.S. Dollar and a steep drop in U.S. stocks would be the best combination to fuel a strong market. However, the unknown is the event that will lead to this scenario.
On Tuesday, weaker-than-expected U.S. homebuilding data provided some support by offering more evidence of a sharp slowdown in economic activity early in the year. Additionally, uncertainties surrounding Brexit are also increasing gold’s safe-haven appeal. However, keeping a lid on gold prices is the stronger U.S. Dollar. It rose against a basket of currencies to its highest level in two weeks on Tuesday.
In my opinion, it is going to take the perfect combination of weaker Treasury yields and a steep stock market sell-off to trigger a breakout to the upside in gold. If stocks continue to rise along with yields then look for a rangebound trade.
Technically, it is going to be trader reaction to a 50% to 61.8% retracement zone that fuels the move. The key level to watch today is $1321.80. A sustained move under this price will give gold a downside bias. A sustained move over this price will generate an upside bias. However, the trigger point for an acceleration to the upside is $1329.80.
Later today, investors will get the opportunity to react to the latest data on the Current Account and Trade Balance.