Price of Gold Fundamental Daily Forecast – Could Rally Until U.S. Dollar Finds Support

Gold futures finished 2019 on a high note as a weaker U.S. Dollar drove up demand for dollar-denominated gold. Since the U.S. and China announced Phase One of a trade deal on December 13, investors have been dumping U.S. Dollar long hedge positions placed as protection against an escalation of the trade war between the two economic powerhouses.

On Tuesday, the last trading day of the year, February Comex gold settled at $1523.10, up $4.50 or 0.30%.

Gold started the year with a rally as worries over slowing global growth due to an escalating trade war drove U.S. Treasury yields lower, making gold a more attractive investment. The first leg of the rally took gold higher until the week-ending February 22.

Prices weakened from the week-ending February 22 until the week-ending May 24 while the U.S. and China tried to negotiate a trade deal. Gold posted a nearly $300 rally from the week-ending May 24 to the week-ending September 6 as trade talks broke off and both countries retaliated with new tariffs.

Also contributing to the tremendous rally were fears of a U.S. recession. These fears accelerated after U.S. Treasury yields inverted in August. Additionally, in late July, the U.S. Federal Reserve cut its benchmark interest rate, the first of three that eventually ended at the end of October.

At the same time, the European Central Bank and the Bank of Japan became more accommodative. Furthermore, the Reserve Bank of Australia and the Reserve Bank of New Zealand began slashing interest rates to record lows.

Gold hit its high for the year in early September after the United States and China announced a resumption of trade talks for mid-October.

Gold drifted lower until the week-ending November 15, trimming as much as $120 from its highpoint. Prices fell as the U.S. economy improved and the progress of the trade talks made investors fell a little more optimistic about a trade deal being reached before the end of the year.

The U.S. Dollar topped against a basket of currencies during the week-ending October 4. Since that top, a series of lower tops and lower bottoms indicated investors were beginning to shed their dollar hedges as they grew more optimistic about a trade deal.

Gold consolidated from the week-ending November 15 to the week-ending December 13. During the shortened Christmas week, gold price broke out to the upside of its five week range. The rally continued until the end of the year. The end of the consolidation period corresponded with the announcement of Phase One of the trade deal.

Gold rallied the last two weeks of the year despite strong demand for risky assets, which surprised some traders and may have caught short-sellers by surprised. A plunge in the U.S. Dollar is primarily responsible for the price surge.

Bullion ended 2019 with its strongest annual increase since 2010, as worries over global economic health triggered a surge of interest in precious metals.

Gold retreated from its highs as conditions improved and central banks slowed the pace of accommodation with several taking a “wait and see” attitude. Some aren’t likely to make their next move until the Fed makes a move. Fed policymakers ended the year by saying they were not likely to raise rates until inflation picks up. At the same time, the odds of a Fed rate cut in March have dropped considerably since the trade deal announcement.