Price of Gold Fundamental Daily Forecast – Expectations of Rising Rates Driving Hedge Funds Away from Gold

Gold futures traded lower on Monday as the lack of buying interest continued to weigh on prices. Aggressive speculative buyers tried to rally the precious when the U.S. Dollar weakened, but the volume was too light to continue the move.

A steep plunge in risky assets and drop in U.S. Treasury yields also failed to draw the attention of traditional safe-have gold buyers.

The major U.S. stock indexes declined across the board on concerns over an escalation of the trade war between the United States and its trading partners, China and the European Union.

In the cash market, the benchmark S&P 500 Index settled at 2717.07, down 37.81 or -1.37%. The blue chip Dow Jones Industrial Average closed at 24252.80, down 328.09 or 1.33% and the tech-based NASDAQ Composite finished at 7535.59, down 157.23 or -2.09%.

U.S. government yields dropped on Monday as investors fled higher risk assets as trade concerns continued to weigh on economic sentiment. The yield on the benchmark 10-year Treasury note fell to 2.88 percent, while the yield on the 30-year Treasury bond fell to 3.027 percent.

In U.S. economic news, sales of new U.S. single-family homes increased more than expected in May as sales in the South surged to their highest level in nearly 11 years.

According to the U.S. Commerce Department, new home sales jumped 6.7 percent to a seasonally adjusted annual rate of 689,000 units last month, the highest level since November 2017. April’s pace was revised down to 646,000 units from the previously reported 662,000 units.

Forecast

Gold is trading lower early Tuesday. The U.S. Dollar is lower against a basket of currencies. U.S. stocks are trading slightly better and 10-Year U.S. Treasury yields are rising.

At 0630 GMT, August Comex Gold futures are trading $1265.50, down $3.30 or -0.27%.

According to government regulators, long interest in gold is currently at a 2-1/2 year low. Reports show that hedge fund money is flowing away from gold and into the U.S. Dollar. Commodity Futures Trading Commission data shows that professional traders are loading up on bullish dollar bets at the fastest pace on record. This is in reaction to widely expected hawkish moves by the Fed.

So there you have it, gold is trending lower because the Fed is expected to raise rates at least two more times in 2018 and perhaps as many as three times in 2019. Since gold is a non-yielding asset, prudent investors want no part of it.

If the tide does shift and gold rallies, then the move is likely to be driven by short-covering rather than new buying.

In the U.S. on Tuesday, traders face a slew of fresh economic data including the S&P/CS Composite-20 HPI, which is expected to come in at 6.9%.

The major report is the Conference Board Consumer Confidence. Traders are looking for a read of 127.6, down slightly from 128.0.

The Richmond Manufacturing Index is expected to come in at 15, down slightly from 16. FOMC Member Bostic is also scheduled to speak. He could move the market if he talks about the impact of a trade war on economic growth and Fed monetary policy.