Price of Gold Fundamental Daily Forecast – Higher Despite Firm Yields, Demand for Risk

Gold prices are inching higher Monday but volume is light as increasing risk appetite amongst investors, driven by optimism on U.S-China trade talks and fading fears of a global economic slowdown, are keeping many of the major speculative buyers on the sidelines.

Prices may be up, but the tight inside range suggests investor indecision and impending volatility. Higher Treasury yields and increasing demand for risky assets are keeping a lid on prices today. The dollar is also edging higher against a basket of currencies, which is leading to a drop in demand for dollar-denominated gold.

At 13:33 GMT, December Comex gold is trading $1514.90, up $3.50 or +0.23%.

In Europe, shares soared to a near two-year high on strong earnings reports and hopes for a trade deal between Washington and Beijing. This is providing resistance for gold. However, weak manufacturing data from major European regions indicated further uncertainty in global growth, which is supportive of demand for bullion as a safe-haven asset.

On the trade front, the United States and China on Friday said they made progress in talks aimed at bringing an end to a nearly 16-month-long trade war that has harmed the global economy. Furthermore, U.S. officials have gone as far as saying a deal could be signed this month.

Friday’s stronger-than-expected U.S. Non-Farm Payrolls report also helped ease tensions over U.S. economic weakness. This followed a largely expected 25-basis point rate cut by the U.S. Federal Reserve.

In other news, speculators increased their net long positions in both gold and silver in the week to October 29, data from the Commodity Futures Trading Commission (CFTC) showed.

Daily Forecast

It’s a slow economic report day in the United States with Factory Orders being the only release. It is expected to come in at -0.5%.

In Europe, the new head of the European Central Bank (ECB) Christine Lagarde will be giving her first speech in the role later in the day and traders expect she will stick to an easy policy script left by her predecessor, Mario Draghi.

Lagarde’s comments are likely to have an effect on the Euro. A positive effect could drive the Euro higher, which would weaken the dollar and possibly drive up demand for dollar-denominated gold.