Price of Gold Fundamental Daily Forecast – Edging Lower From One-Month High as US Dollar Firms

Gold futures are edging lower on Friday after hitting a one-month high the previous session. Profit-taking and position-squaring ahead of the weekend and next week’s holiday shortened week are likely behind the price action. The catalyst is stronger U.S. Dollar, which dampened demand for the dollar-denominated asset.

The early price action suggests investors have fully-priced in a new fiscal stimulus deal. We could still see a spike to the upside when the deal is announced, but I think that is likely to be a bull-trap for those buying late in the move. Furthermore, at current price levels, I think there is more risk to the downside if the deal is delayed or if it fails completely.

At 12:00 GMT, February Comex gold is trading $1889.20, down $1.20 or -0.06%.

Despite Friday’s small setback, the precious metal is up about 2.0% for the week and set for a third weekly gain.

Longer-term, gold received support from the U.S. Federal Reserve’s pledge to continue its bond-buying program until “substantial further progress” is seen in restoring full employment and hitting its 2% inflation target.

Short-term traders are celebrating the on-going fiscal stimulus negotiations that apparently are very close to yielding fruit. Overnight, however, there was a snag. U.S. Congressional lawmakers scrambled to pass a coronavirus aid package on Thursday, even as Republicans insisted that expiring U.S. Federal Reserve lending programs can’t be revived.

Profit-taking is helping to boost the U.S. Dollar against a basket of currencies on Friday after the greenback took a beating throughout the week. Traders in Asia skimmed some profits from the big short this week, which had driven the greenback to a nine-month low against the safe-haven Japanese Yen and to multi-year highs versus the Euro, Australian and New Zealand Dollars.

The Sterling is on pace to finish over 2% higher for the week, its best weekly rise in six months, fueled by hopes of a Brexit trade deal breakthrough before the end of the year.

Daily Forecast

The news is mixed, volume is low and the holidays are coming. All of these reasons are encouraging profit-taking on Friday. The chart pattern suggests a bullish tone could develop on a sustained move over $1894.60. Look for a bearish tone to develop on a sustained move under $1870.30.

Holding between $1870.30 and $1894.60 will indicate investor indecision and impending volatility.

For a look at all of today’s economic events, check out our economic calendar.