Price of Gold Fundamental Daily Forecast – Fed Tightening Means Gains Will Be Limited by New Short-Sellers

Gold futures are trading higher shortly before the mid-session on Thursday as investors continued to buy weakness in an effort to prevent a near-term price collapse. The fundamentals at this time don’t support a long-term rally so I suspect any near-term strength will be designed to set up the next shorting opportunities.

In other words, the bears are letting the gold bugs buy so they can short at higher prices ahead of the next steep break that will likely take prices below $1716.00 and probably into at least $1677.90.

At 14:05 GMT, December Comex gold prices are trading $1744.50, up $21.60 or +1.25%.

Gold is being supported today by a slight pullback in the U.S. Dollar and a small dip in U.S. Treasury yields. However, the longer-term resistance is being generated by expectations that the U.S. Federal Reserve would soon start tapering its monetary support.

This week’s steep rise in Treasury yields has cast a bearish pall on gold prices that actually began last week when Fed policymakers indicated tapering of its massive stimulus would commence in November and the first rate hike would like take place in 2022 rather than 2023 as forecast in the Fed’s June economic projections.

A near stock market correction, the U.S. debt ceiling impasse, rising global inflation and the Evergrande debt crisis were all screaming a buy signal for old school safe-haven gold buyers, but smart investors moved into the U.S. Dollar instead, pressuring the yellow metal.

This supports the notion that gold is no longer being treated as a safe-haven but rather an investment. And since it doesn’t pay you any interest to hold it, it becomes worth less and less as interest rates rise.

Now we understand that there are going to be periodic spikes to the upside in gold. That’s just the nature of the beast, but as long as the Fed and other central banks are tightening, rallies should be treated as selling opportunities.