Advertisement
Advertisement

Price of Gold Fundamental Daily Forecast – Higher as Traders Bet on Stock Market Correction

By:
James Hyerczyk
Updated: Feb 5, 2020, 15:21 UTC

Gold may not break much today, but gains are likely to be capped by rising yields and equities. If the two should turn negative then we could see a reversal to the upside.

Gold

Gold futures are edging higher on Wednesday shortly after the cash market opening. Earlier today, the market hit its lowest level since January 14 before rebounding. Pressuring the market early was firmer Treasury yields, a stronger U.S. Dollar and increasing demand for risky assets.

On Tuesday, gold fell more than 1% as China’s steps to mitigate the economic impact of the coronavirus epidemic drove some investors away from safe-haven assets and back into riskier, higher-yielding assets.

At 15:00 GMT, April Comex gold is trading $1557.30, up $1.80 or +0.10%.

“The dramatic move in global equity markets, especially in the U.S. markets, clearly indicates there is lesser concern about coronavirus denting GDP and we have a lesser need for safe havens,” said David Meger, director of metals trading at High Ridge Futures.

The easing monetary policy measures by the Peoples’ Bank of China also calmed traders’ nerves while sending global equity markets soaring.

A bullish U.S. jobs report is also capping gains on Wednesday. According to a report from ADP and Moody’s Analytics, the private sector of the economy added 291,000 in private payrolls for the best monthly gain since May 2015. Traders were looking for an increase of 150,000 jobs.

In another potential blow to the gold market bulls, U.S. services sector activity picked up in January, with industries reporting increases in new orders, suggesting the economy could continue to grow moderately this year even as consumer spending is slowing.

The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing activity index increased to a reading of 55.5 last month, the highest level since August.

Daily Forecast

Gold may not break much today, but gains are likely to be capped by rising yields and equities. If the two should turn negative then we could see a reversal to the upside.

Today’s economic data suggests the Federal Reserve should remain on the sidelines, leaving rate unchanged. In the meantime, look for the U.S. Dollar to strengthen, putting pressure on dollar-denominated gold.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement