Price of Gold Fundamental Daily Forecast – Caught Between Rising Treasury Yields and Falling Dollar

Gold futures retreated on Thursday as investors reacted to hawkish comments from several central banks. Despite the lower close, the market was rangebound for most of the session as gold investors find themselves trapped between the weaker U.S. Dollar and rising Treasury yields.

At 0630 GMT, August Comex Gold futures are trading at $1243.60, down $2.10 or -0.17%.

The U.S. Dollar has been pressure across the board all week, but this hasn’t helped gold futures, which have been trading lower since a “flash crash” on Monday unexpectedly took out long traders.

European Central Bank President Mario Draghi ignited a Euro rally on Tuesday, when he noted that “reflationary forces have replaced deflationary forces” and hinted that the ECB could trim its stimulus this year. Draghi’s comments drove the dollar sharply lower and opened the door for other global central bankers to give their opinion on the direction of interest rates.

Top central bankers from the U.K., Canada and New Zealand have this week, to varying degrees, talked about the need to follow the Fed’s lead and raise interest rates.

Bank of England Governor Mark Carney said on Wednesday that the central bank is likely to need to raise interest rates as the U.K. economy comes closer to operating at full capacity.

Bank of Canada chief Stephen Poloz said rate cuts had done their job and the bank needed to consider its options at its upcoming policy meeting.

The hawkish global central banker comments drove the U.S. Dollar lower, but at the same time drove up U.S. Treasury yields. This set the trap for gold traders, who aren’t sure which way to play the market at this time.

Forecast

Rising U.S. Treasury yields should be enough to keep a lid on gold prices. Speculative buying due to concerns over geopolitical events like President Trump’s problems, the war in Syria and Brexit negotiations may be enough to slow down the selling, but not strong enough to turn gold bullish.

The geopolitical events will eventually fade away, but it looks as if global interest rates are just starting to rise. This is likely to keep consistent pressure on gold over the near-term.

There is an outside chance that a steep sell-off in stocks could trigger a short-covering rally in gold, but once again, not likely to turn gold bullish at this time.