Price of Gold Fundamental Daily Forecast – Evidence of Safe-Haven Interest, but Little Speculative Buying

Gold futures are edging higher on Wednesday. The price action suggests that traders have decided that gold is a reasonable safe-haven asset along with the Japanese Yen and U.S. Treasury yields. Economic data aside, the price action is being dictated by renewed concerns over U.S.-China trade relations, which are causing investors to trim their positions in higher risk assets.

At 10:30 GMT, June Comex gold is trading $1289.10, up $3.50 or +0.27%.

The bias has been to the upside all week in the wake of the news that the U.S. plans to increase tariffs on China. Some see the move as a negotiation ploy designed to motivate China to finish the trade deal. Therefore, it may be causing just a temporary glitch in the financial markets, forcing investors to hedge their stock positions in gold. Other see it as something more dramatic that could lead to a prolonged decline in stocks.

So far the rally in gold has been tentative with investors preferring to hedge their risks in the Japanese Yen and U.S. Treasurys. However, prices could move sharply higher if the U.S. and China decide to break off talks indefinitely.

So far, it looks as if investors are buying gold as a hedge. The rally could get stronger if investors decide to buy gold in anticipation of an escalating global economic slowdown. However, this move would be all speculation since there are no signs of this yet.

Daily Forecast

Although there has been an increase in geopolitical risks, gold’s gains could be limited if investors choose to protect themselves with the Japanese Yen, Treasurys or the U.S. Dollar. These are likely to be the safe-haven assets of choice.

The real driver of the price action in gold is Fed monetary policy and unless it changes suddenly, or if economic data suggests a rate cut later in the year, the gold market may not be the place to be if you’re looking for reasonable economic gains.