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James Hyerczyk
Comex Gold

Gold futures are drifting sideways to lower on Thursday as traders search the news for the next catalyst that could move prices in either direction in a big way. The bulls, who have been led to believe that gold is a so-called “safe-haven” asset, have lost some of their incentive to buy over the past week with the announcement of a “Phase One” trade deal between the United States and China, and U.K. Prime Minister Boris Johnson’s huge victory in the general election over Brexit.

At 10:47 GMT, February Comex gold is trading $1477.80, down $0.90 or -0.06%.

Stronger-than-expected U.S. economic data is also weighing on gold prices. With the strong data comes rising Treasury yields, which we all know control gold prices. Since gold pays neither interest nor dividend, attractive yields tend to draw money from gold because investors want to get paid.

Higher yields are also providing some support for the U.S. Dollar. A higher dollar tends to weigh on gold because it reduces demand for the dollar-denominated asset.

Gold and Trump’s Impeachment

If you asked any gold trader nearly four years ago, what would you do if newly elected President Trump was impeached, they probably would’ve said, “Buy gold.”  Well, maybe they did because gold is not going down. However, it’s not going up either. It’s just stuck in an elongated price range that could be an indication of accumulation. We don’t know.

If investors were concerned about President Trump being removed from office then Treasurys and the Japanese Yen would be skyrocketing, and gold would be right behind. So we know the support for gold isn’t coming from safe-haven buying.

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Gold and the Trade Deal

In my opinion, uncertainty over the trade deal is helping to underpin gold prices at this time. Sure the deal was announcement, but has anyone read it? Have U.S. and China agreed upon a time or place for the deal to be signed? When will “Phase Two” negotiations begin?

These are all legitimate questions that need to be answered. So if you looking for reasons why some speculators are still holding on to gold, I think you have to start by looking at the trade deal.

Daily Forecast

Volume is extremely low so be careful not to get caught in a whipsaw trade.

This week’s stronger-than-expected U.S. economic reports have breathed life into the U.S. Dollar so pay attention to today’s reports. They include the Philly Fed Manufacturing Index, Current Account, Weekly Unemployment Claims, the Conference Board’s Leading Index and Existing Home Sales.

Strong reports could weigh on prices because they support the notion that the Federal Reserve will not cut rates in 2020.

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