Price of Gold Fundamental Daily Forecast – Direction Dictated by Demand for Higher-Yielding Assets

Gold futures are trading lower on Tuesday, erasing earlier gains that were fueled by renewed concerns over the progress of U.S.-China trade talks. Weighing on prices today is a jump in demand for risky assets, led by another surge to record highs by the major U.S. stock indexes, a rise in U.S. Treasury yields and a slightly higher U.S. Dollar.

At 11:45 GMT, December Comex gold is trading $1467.70, down $4.20 or -0.28%.

Trade Talk Uncertainty Whipsaws Gold

Optimism over a possible trade deal drove up demand for higher-risk assets, pressuring gold early in the session on Monday. The optimism was fueled after Chinese state media said over the weekend the United States and China had held “constructive” trade talks, days after White House economic adviser Larry Kudlow said they were getting close to a trade deal.

However, after reaching record highs, the major stock market averages failed to post significant gains, triggering a flight-to-safety move that drove gold through last week’s high.

The rally in gold was fueled after CNBC’s Eunice Yoon reported, citing a government source, that Chinese officials are pessimistic about the prospect of a U.S.-China trade deal. China is troubled by President Donald Trump saying recently the U.S. would not roll back tariffs as they thought both sides had agreed to do so in principle, Yoon reported.

Daily Forecast

Flip a coin. Gold prices are likely to tumble if optimism over a trade deal continues to drive up demand for higher-yielding assets. Demand for gold as a safe-haven asset will be fueled if investors decide to sell stocks. Furthermore, investors should pay close attention to the direction of U.S. Treasury yields. If yields weaken then look for gold to be underpinned. If yields rise then gold prices are likely to be capped.

On the economic front, traders will get the opportunity to react to the latest data on Building Permits and Housing Starts. FOMC Member John Williams is also scheduled to speak.

Unless there is breaking news over a trade deal, gold is likely to remain rangebound as investors position themselves ahead of Wednesday’s Federal Open Market Committee Meeting Minutes.