Price of Gold Fundamental Daily Forecast – Increased Demand for Risky Assets Pressuring Gold

Gold prices are under pressure early Monday as U.S.-North Korean tensions have eased somewhat due to diplomatic activity. This is helping to boost demand for higher yielding assets including U.S. equities and the U.S. Dollar.

At 0605 GMT, December Comex Gold futures are trading $1291.10, down $2.90 or -0.22%.

Last week, prices rallied to a 2-month high on flight-to-safety buying and weaker-than-expected U.S. inflation data. Additionally, speculators boosted their net long position in COMEX gold for the fourth straight week to a near two-month high during the week to August 8, U.S. Commodity Futures Trading Commission data showed on Friday.

In other news, a leading refiner told Reuters that India’s gold imports are likely to jump by a third in 2017 to 750 tonnes on restocking by jewelers and as good monsoon rainfall is expected to boost demand in rural areas during the upcoming festive season.

Ghana’s gold output is likely to drop sharply in 2017 because of curbs on the small-scale mining that lifted production last year but was causing damage to the environment, a government official said on Saturday.

Additionally, India’s Multi Commodity Exchange (MCX) will launch the country’s first gold options contract in September allowing even smaller players in the bullion industry an instrument to hedge their risk, a senior company official told Reuters.

Forecast

There are no U.S. economic releases scheduled for Monday so the price action will be dictated by the situation between the United States and North Korea.

If diplomatic negotiations continue to diffuse the dicey situation between both nations then gold is likely to feel downside pressure. A risk on situation should drive up U.S. Treasury yields which will make the U.S. Dollar a move attractive investment. This should encourage investors to sell dollar-denominated gold.

Increased demand for U.S. equity futures should also help push gold prices lower because this will encourage gold buyers to sell positions bought as hedges against a stock market meltdown.

Of course, renewed concerns or an escalation of the situation regarding North Korea will bring back the buyers.

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