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James Hyerczyk
Comex Gold
Comex Gold

Gold prices took a hit on Tuesday, driven by lower demand for safe-haven assets after the stock market firmed. The U.S. Dollar also strengthened as the easing of fears of an even steeper sell-off in equities led investors to dump the safe-haven Japanese Yen. The rise in the dollar made gold a less-desirable investment.

June Comex Gold settled at $1337.30, down $9.60 or -0.71%.

There were no major economic reports on Tuesday. Minor reports included IBD/TIPP Economic Optimism which came in below expectations at 52.6. Total Vehicle Sales were up 17.5 Million.

Late Tuesday, Fed Governor Lael Brainard said in a speech that even with this year’s correction, stocks and other assets are still high by historical standards.

“Valuations in a broad set of markets appear elevated relative to historical norms, even after taking into account recent movements,” Brainard said during a speech in New York, according to prepared remarks.

Daily June Comex Gold

Forecast

Gold is firming early Wednesday on geopolitical fears. Additional pressure is being provided by a weaker U.S. Dollar and lower demand for risky assets. Asian stocks are trading mostly lower as Tuesday’s bounce on Wall Street stalled amid simmering tensions between the United States and China over trade sanctions.

Gold is likely to be underpinned by traders who are on edge about U.S. tariffs triggering retaliatory actions from the U.S. trading partners and potentially causing a trade war that would dent global growth.

The week started with China announcing retaliatory tariffs on the U.S. This was followed on Tuesday by a response from the U.S. Trade Representative’s office which published its proposed list of around 1,300 Chinese imports that could be hit with additional tariffs.

This prompted a response from China which signaled to traders that the world’s second largest economy is ready to aggressively follow-up on the last move by the U.S.

In response, China said via an embassy statement it opposed the additional tariffs proposed and that “it is only polite to reciprocate,” Reuters reported. China’s ambassador to the U.S. also told CNBC on Wednesday that his country would “fight back” against the latest measures.

In the U.S., traders will get the opportunity to react to a slew of economic data including the ADP Non-Farm Employment Change report which could give us an indication of what to expect from Friday’s U.S. Non-Farm Payrolls report.

The next major report on Wednesday will be ISM Non-Manufacturing PMI. It is expected to come in at 59.0, slightly below the previously reported 59.5.

Finally, Factory Orders are expected to show a 1.7% rise, coming in better than the previously reported -1.4%. Cleveland Fed President Loretta Mester is also scheduled to speak.

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