Price of Gold Fundamental Daily Forecast – Dollar Strength Too Much for Gold Buyers to Bear

Despite lingering tensions in the stock market, gold futures fell to more than two-week low on Wednesday as the U.S. Dollar soared to a multi-month high against a basket of major currencies. Adding to the pressure was a recovery in Asia stock markets, firming U.S. Treasury yields and upbeat U.S. economic data.

At 0802 GMT, December Comex Gold is trading $1216.30, down $8.90 or -0.73%.

The U.S. Dollar is trading near a 16-month high versus a basket of major currencies as traders continue to bet the U.S. economy will outperform other major economies in Europe, Asia and North America. Furthermore, the divergence between the hawkish U.S. Federal Reserve and the other dovish central banks is making the U.S. Dollar a more attractive investment.

The stronger greenback makes dollar-denominated gold more expensive to foreign buyers, therefore, making it a less-desirable asset. Rising interest rates especially reduce the attraction of gold since it doesn’t pay interest or a dividend.

A strong performance in the Asian markets on Wednesday also pressured gold prices because it helped make gold a less-desirable safe-haven asset.

In other news, the Conference Board’s Consumer Confidence Index rose to 137.9, higher than the 136 estimate. The index is at its highest level since September 2000. The company said the results reflect a hot labor market and expectations that economic growth will remain solid in the near term.

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Forecast

December Comex Gold prices are likely to continue lower with $1215.30 to $1208.00 the primary downside target. Since the trend is up and this zone represents value, we may see buyers step in on a test of this zone. In order to rally from this zone, the dollar is going to have to weaken and volatility has to return to the stock market.

Later this week, gold traders will be looking at Friday’s U.S. non-farm payrolls report for direction. Next week, the focus will shift toward the U.S. mid-term elections on November 6.

On Wednesday, investors will get the opportunity to react to a pair of U.S. economic reports. ADP Non-Farm Employment Change is expected to show the private sector of the economy added 188K jobs in October. Chicago PMI is expected to come in at 60.1, slightly below the 60.4 previous reading.