Price of Gold Fundamental Daily Forecast – Gold Not Likely to Rally Until Currencies Stabilize

The steep sell-off in the currency markets due to central bank downgrades of their respective economies is driving up the U.S. Dollar while putting pressure on dollar-denominated gold prices. This price action is likely to continue as long as sellers continue to press the currencies lower.
James Hyerczyk
Comex Gold

Gold futures are edging higher on Friday shortly before the regular session opening. However, the market remains in a position to post its first weekly loss in three. Putting the pressure on the market all week has been the stronger U.S. Dollar. Safe-haven buying of the dollar in reaction to a weakening global economy has been the catalyst this week that helped make dollar-denominated gold a less-desirable investment.

At 12:37 GMT, April Comex gold is trading $1316.50, up $2.30 or +0.18%.

Concerns over weakening global growth was highlighted on Thursday after the European Commission sharply cut its forecasts for Euro Zone economic growth this year and next on expectations the bloc’s largest countries will be held back by global grade tensions and domestic challenges. The Commission said Euro Zone growth will slow to 1.3 percent this year from 1.9 percent in 2018, before rebounding in 2020 to 1.6 percent.

Early Friday, a dovish outlook by the Reserve Bank of Australia also helped limit demand for gold by making the dollar a more desirable asset. The RBA may have telegraphed a rate cut for later in the year when it made a substantial downward to its growth forecasts in its quarterly Statement of Monetary Policy (SoMP).

Pressuring gold by sending investors into the safe-haven U.S. Dollar are renewed worries over U.S.-China trade relations. The growing concerns were fueled by comments on Thursday from a U.S. trade official who felt the two economic powerhouses were still far away from striking a trade deal despite recent optimistic remarks from the Trump administration, and a report that an upcoming meeting between U.S. President Trump and China’s President Xi Jinping would be pushed into March.

Gold prices retreated on Thursday after White House economic advisor Larry Kudlow said that China and the U.S. were still far away on striking a trade deal. Later in the session, gold weakened further after CNBC reported that the Trump-Xi meeting before the March 2 deadline was “highly unlikely.”

Daily Forecast

The steep sell-off in the currency markets due to central bank downgrades of their respective economies is driving up the U.S. Dollar while putting pressure on dollar-denominated gold prices. This price action is likely to continue as long as sellers continue to press the currencies lower.

However, stock market weakness or a shift in demand for risky assets should eventually make gold a more desirable safe-haven asset. Essentially, we’ll have to see greater stock market volatility to the downside to drive hedgers into gold.

We’re at a very tricky transition period for gold since the early reaction to the slowing global economy appears to be sending investors into safe-haven Treasurys, Japanese Yen and U.S. Dollar, instead of gold.

Please let us know what you think in the comments below.

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