Price of Gold Fundamental Daily Forecast – Inching Higher on Low Volume Amid Dollar Weakness

Gold traded mostly steady on Monday, but still lost ground even with the dollar hovering around its three-year low. Increased demand for risky assets as well as rising Treasury yields may have put a lid on gold prices.

April Comex Gold futures settled at $1336.90, down $1.10 or -0.08%.

Forecast

Gold prices are inching higher early Tuesday because of a slightly weaker U.S. Dollar. Lower Treasury yields are also helping to provide support when another surge in global equity markets is helping to limit the market’s gains.

After rallying to $1349.20 last week, gold started to show signs of topping when it retreated to $1329.10. The mid-point of this $20.00 range is $1339.20. A sustained move over this level will indicate the presence of buyers.  Breaking back under this level will signal the presence of sellers.

At times, it is difficult to determine the catalyst behind the strength in the gold market. Stocks are soaring and Treasury yields are rising because of higher global interest rates and a positive outlook for global economic growth. These factors tend to put pressure on gold prices.

It ultimately comes down to the direction of the U.S. Dollar since gold is a dollar-denominated commodity. If the support for the dollar continues to erode because of expectations of the lifting of stimulus and the possibility of higher global interest rates then gold should continue to be underpinned. However, over the long-run, gold prices should be pressured.

The same goes with gold and its relationship with demand for higher risk assets. Holding gold does not earn interest like putting money in a bank. Also owning gold does not pay a dividend like certain stocks. Long-term, these factors should be bearish for gold. Nonetheless, over the short-run gold could continue to rally.

Finally, further liquidation in Bit Coin and other cryptocurrencies could give gold an unexpected boost. After blowing out of these instruments, it makes sense to park your proceeds in an alternative asset such as gold.