Price of Gold Fundamental Daily Forecast – Getting Support from Tensions in Middle East, Falling Global Yields

Gold recovered from a sharp sell-off on Friday in reaction to the U.S. jobs report and a number of negative events last week. Gold was primarily underpinned on Monday by a drop in global interest rates. Germany’s benchmark bond yield hit a near two-month low as investors awaited clues on the European Central Bank’s asset purchase plans. U.S. Treasury yields also fell.

December Comex Gold futures settled at $1281.60, up $12.40 or +0.98%.

U.S. Treasury yields fell Monday after a speech by New York Federal Reserve President William Dudley.

The yield on the benchmark 10-year Treasury Note fell to around 2.318 near the close, while the yield on the 30-year Treasury Bond fell to 2.797 percent.

Dudley drove yields lower when he urged Congress on Monday to “do no harm” in its deliberations on whether to roll back regulations implemented during the financial crisis, reported Reuters. These regulations, implemented during the financial crisis, introduced sweeping mandates including capital and liquidity requirements on banks.

“As we reflect on potential changes to the U.S. regulatory regime, we should not lose sight of the horrific damage caused by the financial crisis, including the worst recession of our lifetimes and millions of people losing their jobs and homes,” said Dudley.

Political news was also at the forefront on Monday with President Trump visiting Asia this week. On Monday, Trump visited Japan, saying he stood by the country when it comes to dealing with the “menace” from North Korea, Reuters reported; with Trump adding that both the U.S. and Japan should work together to fix issues with trade.

Forecast

Increased demand for risky assets is putting pressure on gold prices early Tuesday. However, the market remains underpinned by geopolitical events in the Middle East and falling global bond yields.

The strong rebound rally is an indication that investors are coming in to support a pair of bottoms at $1263.80 and $1262.80. The upside momentum has put the market in a position to challenge a key retracement zone at $1286.10 to $1291.40.

Since the main trend is down, we could see sellers re-emerge on a test of the retracement zone. However, if sellers are forced to aggressively cover their positions, we could see a possible acceleration to the upside on a move over $1292.90. This move will also change the main trend to up on the daily chart.

Supporting the market on Tuesday will be the geopolitical tensions in the Middle East and weakening interest rates. Gains could be limited however if increasing appetite for risk continues to be an issue.