Price of Gold Fundamental Daily Forecast – Demand for Risk, Firm Yields Capping Gains Again
Gold futures are trading lower for a second session on Thursday after hitting a one-month high earlier in the week. Technical factors and the lack of a bullish catalyst are helping to keep a lid on prices. Today’s weak performance is being fueled by mixed events.
Helping to pressure prices is increased demand for higher risk assets and firm Treasury yields. The nearly flat U.S. Dollar Index is having little influence on prices.
At 10:44 GMT, June Comex gold is trading $1294.50, down $3.30 or -0.25%.
Bullish traders are trying to build a case for a rally due to geopolitical tensions surrounding U.S.-China trade relations and potential military activity in the Middle East, but these factors have been much of an influence on gold prices this week.
Investors haven’t been treating gold as hedge, but rather an investment. During times of geopolitical turmoil, investors have flocked to U.S. Treasurys, the U.S. Dollar and the Japanese Yen for protection.
However, gold has been garnering support on days when Treasury yields fall in combination with a weaker U.S. Dollar and a drop in demand for higher risk assets. If this trend continues, gold is going to have a hard time mounting a prolonged rally.
Technically, the trend may have shifted to up earlier in the week, but it took seven days to accomplish this after prices hit a new low for the year at $1267.30 on May 2. This indicates the buying has been tentative. I don’t think we can truly say gold has turned the corner and is poised to move sharply higher until buyers are willing to take out more significant tops like $1330.80 or $1356.00. At this time, these prices are just potential targets.
It’s not the headlines that will drive prices higher, but rather a combination of a weaker U.S. Dollar, lower Treasury yields and a drop in demand for risky assets. Unless all of these factors weaken at the same time, gold is going to have a hard time attracting strong buyers.