Advertisement
Advertisement

Price of Gold Fundamental Daily Forecast – Firm Yields, Appetite for Risk Encouraging Long Liquidation

By:
James Hyerczyk
Published: Mar 5, 2019, 12:01 UTC

Gold is expected to remain under pressure on Tuesday with the long liquidation being driven by firming Treasury yields. The rise in yields is likely to underpin the U.S. Dollar, which should pressure foreign demand for dollar-denominated gold.

Comex Gold

Gold prices continue to weaken on Tuesday, pressured a stronger U.S. Dollar and weakening safe-haven demand. The strength in the dollar is being provided by rising Treasury yields. Optimism over a likely U.S.-China trade deal is also providing support as it is likely to revive the ailing global economy. Easing fears of a loss in economic momentum in the U.S. is also pressuring gold prices.

At 11:34 GMT, April Comex gold is trading $1255.80, down $1.70 or =0.13%.

Gold prices are also being influenced by the contrast in policy between the U.S. Federal Reserve and other major central banks especially the European Central Bank. Earlier today, the Reserve Bank of Australia also failed to impress gold traders. In the meantime, the Fed continues to remain “patient” about the timing of its next rate hike, but based on the spike in yields, it looks as if Treasury investors believe the U.S. central bank could raise rates at least once in 2019.

This rise in rates has been underpinning the dollar, while capping and pressuring gold prices. Despite Monday’s drop in rates, higher U.S. bond yields have kept the greenback well bid over the past few days. This has helped make the dollar a more attractive assets relative its peers. Essentially, it has been the widening of the interest rate differential that has investors moving capital into the U.S. Dollar.

The dollar has been supported since last Thursday’s release of the latest U.S. Gross Domestic Product report, which showed stronger-than-expected fourth-quarter gross domestic product growth. This news has eased fears of a loss in economic momentum, while raising the odds of at least one Fed rate hike in 2019. While the GDP data has driving the strength in the dollar, it has also been pressuring gold prices.

The dollar is also being underpinned by weakness in the Euro and the Australian Dollar. The Aussie Dollar is likely to remain under pressure as investors begin to price in a potential rate hike. On the Thursday, the Euro will become the focus as the European Central Bank is expected to address the growing pressure on how to protect the Euro Zone economy from a protracted slowdown.

Daily Forecast

Gold is expected to remain under pressure on Tuesday with the long liquidation being driven by firming Treasury yields. The rise in yields is likely to underpin the U.S. Dollar, which should pressure foreign demand for dollar-denominated gold.

Providing additional pressure on gold could be increasing demand for risky assets. If stocks continue to rise then look for investor capital to leave gold and move into equities.

Oversold technical factors could stabilize gold, or even cause a short-covering rally, but this move is likely to be short-lived as long as the dollar remains firm.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement