Price of Gold Fundamental Daily Forecast – FOMC’s Bostic More than Trump Influenced Gold Prices on Monday

Gold prices are trading higher early Tuesday, following through to the upside for a third session after a dramatic price reversal on August 16. The rally is corresponding with an easing of tensions in Turkey, optimism over the upcoming trade talks between the United States and China and falling U.S. Treasury yields.

At 0742 GMT, December Comex Gold futures are trading $1201.30, up $6.70 or +0.56%.

A weaker U.S. Dollar is also helping to make dollar-denominated gold a more attractive asset. The dollar has been retreating for several days on profit-taking following a speculative buying spree by investors seeking shelter from a tremendous drop in emerging market currencies last week.

Some traders are saying that remarks from U.S. President Trump on Monday triggered the sell-off in the dollar and gold’s spike to the upside, but I’m not buying that notion. The dollar was already trading weaker and gold was up when Trump made the comment that he was “not thrilled” with the Federal Reserve for raising interest rates. He may have goosed the markets a little, but he did not cause the move.

If you haven’t noticed, there appears to be a short squeeze going on in the Treasury markets so they are going to be sensitive to any remarks by the President or Fed officials. Furthermore, haven’t we learned by now that the President is in no position to influence the independent Fed?

Additionally, as of August 14, government data showed that hedge fund and money managers were holding record short positions in gold. At the time, I wrote that this was an unusual position for professional traders and it likely wouldn’t last because it was a very uncomfortable and unfamiliar position. As you can see, gold shorts are scrambling to book profits and seem to be willing to pay up to avoid giving back the majority of the recent easy gains.

Sharing equally in the blame for the weaker dollar and stronger gold prices could be Atlanta Federal Reserve Bank President Raphael Bostic who said on Monday he is maintaining his expectation for one more interest rate hike this year, as trade tensions and international events add some downside risk to an otherwise strong U.S. outlook.

Technically, gold is following a blue print seen thousands of times over the course of trading. The first rally up from a prolonged move down in terms of price and time is short-covering. It usually leads to a retracement of its major range. This target zone is $1205.90 to $1215.10. A test of this zone will be decision time for traders. Sellers are likely to return on a test of this zone because the major fundamentals are still bearish. This should lead to a correction of the first leg up from last week’s low.