Price of Gold Fundamental Daily Forecast – Direction Hinges on Euro Price Action; Straddling Key Support at $1272.70

Gold futures are trading slightly higher on Wednesday on low volume. The market is trading inside yesterday’s range despite a stronger U.S. Dollar. The price action suggests investor indecision and impending volatility. Slightly lower demand for equities and another drop in U.S. Treasury yields could also be underpinning prices.

Technical factors could also be contributing to the early support. The gold market is currently down nine sessions from its last main top at $1314.70. Typically, gold markets reverse direction after being down 7 to 10 days. Traders also seem to be reluctant to sell weakness at current price levels. Currently, the market is testing a long-term support area at $1272.70 to $1253.00.

At 12:18 GMT, June Comex gold is trading $1275.40, up $2.20 or -0.17%.

Earlier today, a German business climate index came in below forecasts, but had little impact on the already-weaker Euro. The next major move in gold is likely to be determined by the direction of the Euro because it represents 57% of the U.S. Dollar Index. Today, it looks as if buyers are coming in to defend the Euro at 1.1185, 1.1184 and 1.1177. If the latter fails as support then gold futures could plunge.

Daily Forecast

There are no major U.S. reports on Wednesday. However, investors may start preparing for Thursday’s U.S. Durable Goods report that could have an impact on the direction of the U.S. Dollar. Core Durable Goods Orders are expected to come in at 0.2% and Durable Goods Orders are expected to have risen by 0.7%. On Friday, U.S. first quarter GDP is expected to show the economy grew by 2.2%.

Traders are also paying close attention to the stock market and investor demand for risk. As long as investors continue to be willing to chase yields, gold’s gains are likely to remain capped.

The early price action suggests that trader reaction to $1272.70 is controlling the direction of the market today. If it holds as support then we could see a short-covering rally. However, if it fails and selling pressure increases, there is room to tumble to $1253.00.