Price of Gold Fundamental Daily Forecast – Demand for Risk, Strong Dollar, Rising Yields Pressuring Gold

Gold is under pressure early Thursday with the selling led by increased demand for higher risk assets, a rise in U.S. Treasury yields and a stronger U.S. Dollar.

At 0612 GMT, August Comex Gold futures are trading $1265.00, down $9.50 or -0.75%. If the downside momentum continues, we could see a test of the December 12, 2017 main bottom at $1251.90.

Helping to generate the downside momentum is the mixed-to-better performances in the global equity markets as investors relaxed a little following an elevation in trade tensions between the U.S. and China triggered a sell-off earlier in the week.

In Japan, the Nikkei 225 added 0.79 percent, with machinery stocks leading the gains. Stock markets in China were little changed, but Hong Kong’s Hang Seng Index edged up by 0.03 percent. The Shanghai Composite was up 0.06 percent. Australian stocks put in a strong performance with the S&P/ASX 200 jumping 1.13 percent.

In further proof of a risk-on session, the European markets were expected to open higher Thursday morning.

Gold is also being pressured by higher U.S. Treasury yields. Overnight, 10-year U.S. Treasury notes and 30-year Treasury bonds are trading lower which means yields are up for a second session. On Wednesday, U.S. Treasury yields rose slightly, a sign of diminishing concerns over U.S. trade relations.

The U.S. Dollar is also trading higher against a basket of currencies early Thursday.

Forecast

The downside momentum in gold is strong and there is no support between the current price and its December low at $1251.90 so we expect to see a test of this level over the short-run. Since gold has lost its luster as a safe haven asset, we don’t expect to see much action to the upside unless it’s fueled by position-squaring or short-covering.

The absence of new trade threats from President Donald Trump seems to be enough to calm investor nerves and drive investors out of safe haven assets like T-Notes, the Japanese Yen and gold. Stock traders may be gaining confidence that the U.S. and China will work out their differences. This could prove to be very bearish for gold prices.