Price of Gold Fundamental Daily Forecast – ‘Buy the Dip’ Traders Could Get Crushed by Rising Dollar

Gold prices are easing Friday as the U.S. Dollar edged higher. Treasury yields are falling, however, which tells me that investors are looking for protection on both the dollar and Treasurys. Gold is currently in a positon to post its second straight weekly loss.

The selling pressure in gold this week started on Wednesday with the release of the minutes from the Federal Reserve’s monetary policy meeting in late July. In the minutes, the Fed offered no hints as to further action to shore up the economy. This disappointed gold investors who were betting on the Fed to announce a more dovish approach, perhaps as early as the meeting on September 18.

At 11:57 GMT, December Comex gold is trading $1925.90, down $20.60 or -1.06%.

Dollar Recovering from More than 2-Year Low

Primarily influencing the direction of gold on Friday is the stronger U.S. Dollar which bottomed on Wednesday after the less dovish-than-expected minutes from last month’s U.S. Federal Reserve policy meeting. Safe-haven demand for the dollar was also apparent on Thursday after weekly U.S. jobless claims once again surged over 1 million.

The Federal Open Market Committee minutes prompted dollar bears to buy the heavily shorted dollar, fueling its biggest one-day surge in more than two months. Additionally, short bets were approaching historical extremes and a resurgence of COVID-19 cases in Europe, has investors turning less bearish on the greenback.

Traders also turned bullish the dollar after the Fed stopped short of signaling an imminent shift to putting a lid on Treasury yields or allowing inflation to run hotter.

Daily Forecast

The key area to watch is $1949.40 to $1931.70. Look for a bearish tone to develop on a sustained move under $1931.70 and the bullish tone to return on a sustained move over $1949.40.

The momentum appears to be to the downside but short-sellers are having a difficult time generating downside pressure because bullish investors keep buying dips. They are trading off the drop in yields, but as I said earlier in the week, we’re in a situation where both bonds and the dollar could rise because of safe-haven demand. Remember, gold is not a safe-have asset.

For a look at all of today’s economic events, check out our economic calendar.