Price of Gold Fundamental Daily Forecast – Gains Capped as Dollar Firms on Dovish Lagarde Comments

Gold futures are trading steady on Tuesday after giving back most of its earlier gains. Putting a lid on prices are rising U.S. Treasury yields, while a sideways-to-lower U.S. Dollar is helping to underpin prices.

The price action suggests some traders are still weighing the possibility of an aggressive Federal Reserve against the odds of a recession. Others are focusing on the ECB central bankers’ forum in Portugal that could influence the Euro and consequently the strength of the U.S. Dollar Index.

At 12:03 GMT, August Comex gold futures are trading $1826.20, up $1.40 or +0.08%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $169.90, down $0.19 or -0.11%.

Firm Treasury Yields Weighing on Demand for Non-Yielding Gold

Expectations of aggressive interest rate hikes, especially by the U.S. Federal Reserve, are helping to cap demand for gold. Rising yields increase the opportunity cost of holding non-yielding gold, making bullion a less-attractive investment.

U.S. Treasury yields are higher on Tuesday ahead of a fresh batch of data for further clues on the health of the economy. At 12:03 GMT, the yield on the benchmark 10-year Treasury note is at 3.23% and the 30-year yield is at 3.341.

Possibility of Heightened Volatility with US Data On-Tap

Volume is light early Tuesday with traders seemingly already preparing for the upcoming long U.S. holiday weekend.

Looking ahead, advance economic indicators for May will be released at around 12:30 GMT, with the S&P CoreLogic Case-Shiller national home price index for April and the Federal Housing Finance Agency home pricing index for April set to follow.

Traders will also get the opportunity to react to the latest figures on consumer confidence and Richmond Fed surveys for June. They will be published at 14:00 GMT.

Additionally, Richmond Fed President Tom Barkin and San Francisco Fed President Mary Daly are scheduled to discuss the economic outlook at separate events.

ECB’s Lagarde Comments Pressure Gold

ECB President Christine Lagarde spoke and the Euro fell, boosting the dollar index, and capping gold prices.

The Euro fell below $1.06 as Lagarde offered no fresh insight on the central bank’s policy outlook. With the market already pricing in rate hikes in July and September, Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

More importantly, Lagarde played down recession risks, which is probably the statement putting the most pressure on gold’s advancement.

“We have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum,” Lagarde said Tuesday at the Sintra Forum.