Price of Gold Fundamental Daily Forecast – GDP Report Could Influence Prices, but Bigger Story Remains Possible Trade War

Gold futures are trading slightly lower early Wednesday in reaction to a stronger U.S. Dollar and stable U.S. equity markets. On Tuesday, gold prices fell as concerns about a potential trade war between the U.S. and China eased which supported the Greenback and reduced investor appetite for gold as a safe haven asset.

At 0708 GMT, June Comex Gold futures are trading $1346.60, down $1.30 or -0.10%.

In other news, holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.14 percent to 846.12 tonnes on Tuesday from 847.30 tonnes on Monday.

In the U.S. on Tuesday, the S&P/CS Composite-20 Home Price Index (HPI) was up 6.4%. This was higher than the 6.1% forecast and last month’s 6.3% increase.

The Conference Board’s Consumer Confidence report came in below expectations at 127.7. Traders were looking for a read of 131.2. Last month’s report was revised lower to 130.0.

The Richmond Manufacturing Index was also a disappointing 15. Traders were looking for 23, down from the previously reported 28.

In other news, the head of the Federal Reserve Bank of Atlanta, Raphael Bostic, waded into a potentially contentious debate at the U.S. central bank on Tuesday over whether to replace its 2 percent inflation target, saying he favors a new and nearly untested monetary policy strategy known as price-level targeting.

Forecast

The direction of the gold market on Wednesday will be determined primarily by the movement in the U.S. Dollar.

From an economic report standpoint, Wednesday’s market moving event is likely to be the 4Q 2017 Final GDP. It is expected to come in at 2.7%, higher than the previously reported 2.5%. A stronger-than-expected number could underpin the dollar, at least temporarily. This could put further pressure on gold.

Other reports include the Goods Trade Balance, Preliminary Wholesale Inventories and Pending Home Sales.

Traders will also be watching the price action in the stock market. Another sell-off in the equities markets could drive investors into the safety of gold, offsetting any weakness fueled by a stronger U.S. Dollar.

The overnight geopolitical news is potentially bearish for gold. According to reports, China said early Wednesday it won a pledge from North Korean leader Kim Jong Un to denuclearize the Korean peninsula during a meeting with President Xi Jinping, who pledged in return that China would uphold its friendship with its isolated neighbor.

Traders will also be monitoring any news regarding trade wars. On Tuesday, Bloomberg reported that the Trump Administration was considering using a law reserved for national emergencies in a crackdown on some Chinese investments.

This follows a report from The Wall Street Journal on Monday that the U.S. and China are negotiating behind the scenes for a compromise over recently imposed tariffs in an effort to avoid a trade war.

Stories are also circulating that Trump discussed joining forces with Germany to counter China’s economic practices. This could lead to an escalation of trade tensions.