Price of Gold Fundamental Daily Forecast – Firms on Weaker Dollar, Treasury Yield Dip Amid Stimulus Hopes

Gold futures are edging higher on Tuesday in reaction to increased foreign demand due to a weaker U.S. Dollar and expectations of substantial U.S. fiscal stimulus. A sharp rise in platinum to its highest level in more than four years could also be helping to underpin prices.

Despite today’s strength, many traders believe gold will trade in a wide range over the foreseeable future with some saying the market is not likely to mount a sustainable rally unless there is a sudden reversal in the stock market, which is unlikely at this time.

At 12:51 GMT, April Comex gold is trading $1843.70, up $9.50 or +0.52%.

Dollar Struggles as US Treasury Yields Soften

The U.S. Dollar is hovering near a one-week low on Tuesday as an overnight slide in U.S. Treasury yields raised doubts on the outlook for the greenback against the backdrop of a looming U.S. fiscal stimulus package.

In Monday’s trading, 10-year U.S. Treasury yields rose to near March 2020 highs as investors bet on a broader reflationary theme in the financial markets. But it slipped back to 1.16%, down 4 bps from the overnight highs.

Gold could be underpinned over the short-run with some traders saying the fresh fiscal stimulus along with record low U.S. interest rates will weigh on the currency in the coming months.

Fiscal Stimulus, Inflation Expectations Supportive

U.S. lawmakers have a budget outline to help push through U.S. President Joe Biden’s $1.9 trillion COVID-19 relief package through Congress without Republican support and the legislation is predicted to pass before March 15.

Meanwhile, inflation expectations are rising and the dollar is being pressured after starting the year with notable upside momentum. Gold is considered a hedge against inflation and currency debasement, likely to be spurred by stimulus measures.

Platinum Rising on Deficit Predictions

Auto-catalyst platinum rose 1.9%, hitting its highest level since August 2016. This may be dragging gold prices higher since there is strong interest in spread-trading between the two metals.

“While a fabrication surplus is expected this year, strong investment demand should once again push the platinum market into a deficit,” UBS analysts wrote in a note.

Daily Forecast

Supporting gold this week has been low real U.S. interest rates, a weaker U.S. Dollar, and global economic recovery thanks to aggressive monetary and fiscal stimulus measures.

Unless there is a steep break in the U.S. Dollar or Treasury yields, gold prices could trade rangebound the rest of the session as investors take to the sidelines ahead of Federal Reserve Chairman Jerome Powell’s speech before a virtual Economic Club of New York event at 1900 GMT on Wednesday.