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Price of Gold Fundamental Daily Forecast – Buyers Showing Tentative Reaction to Potentially Bullish Trade War News

By:
James Hyerczyk
Published: Jun 19, 2018, 02:16 UTC

Increased safe haven demand is helping to boost gold prices early Tuesday. The buying is being driven by a drop in U.S. Treasury yields and U.S. equity futures in reaction to President Trump’s threat of new tariffs on China.

Comex Gold

Gold futures finished slightly better on Monday on mostly technical factors after Friday’s steep sell-off. However, gains were limited by a stronger U.S. Dollar. Oversold technical indicators encouraged some speculative buying and bargain-hunting with some buyers continuing to bet on an escalation of the trade war between the U.S. and China. Lower Treasury yields also helped boost demand for gold.

August Comex gold futures settled at $1280.10, up $1.60 or +0.10 percent.

Gold gave back some of its earlier gains after the U.S. stock market recovered more than half of its earlier losses, helped by a recovery in the crude oil market which drove up energy sector stocks.

In economic news, the NAHB Housing Market Index came in lower than expected at 68. Traders were looking for a reading of 70.

In other news, Atlanta Fed President Raphael Bostic said the potential of a trade war is dampening the prospects for above-trend economic growth.

In a prepared statement, Bostic said:  “I began the year with a decided upside tilt to my risk profile for growth, reflecting business optimism following the passage of tax reform. However, that optimism has almost completely faded among my contacts, replaced by concerns about trade policy and tariffs.”

Finally, U.S. government debt yields fell on Monday as trade worries continued to rattle investors. The yield on the benchmark 10-year U.S. Treasury note traded at 2.93 percent, while the yield on the 30-year Treasury bond held at 3.058 percent. Gold was helped because it competes with Treasury markets for investor capital.

Forecast

Increased safe haven demand is helping to boost gold prices early Tuesday. The buying is being driven by a drop in U.S. Treasury yields and U.S. equity futures in reaction to President Trump’s threat of new tariffs on China.

Early Tuesday, Trump requested the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.

The new duties will go into effect “if China refuses to change its practices, and also if it insists on going forward with new tariffs that it has recently announced,” the president said in a statement provided by the White House late on Monday.

Later on Tuesday, investors will get the opportunity to react to a pair of U.S. economic reports. Building Permits are expected to come in at 1.35M, slightly below the previously reported 1.36M. Housing Starts are expected to come in at 1.31 million units, up slightly from 1.29 million units.

The tone of the gold market is firm early Tuesday, but the volume is still below average, suggesting long investors may still be licking their wounds after Friday’s steep sell-off.

At 0205 GMT, August Comex gold is trading $1285.60, up $5.40 or +0.42%.

The news is potentially bullish but without better-than-average buying volume behind a rally, the move is likely to fail at or near $1300.60. Overcoming this level will indicate the buying is getting stronger, However, to really turn bullish, gold is going to have to overcome $1315.60 with conviction.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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