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Price of Gold Fundamental Daily Forecast – Just Enough Offsetting News to Hold Gold Rangebound

By:
James Hyerczyk
Published: Jul 2, 2019, 12:05 UTC

This type of trading could continue all week especially with a U.S. bank holiday on Thursday and the U.S. Non-Farm Payrolls report on Friday. We may not even see the true reaction to the jobs report until Monday when the major market players return from their extended holiday weekend.

Gold Bars and Dollar

Gold prices are edging higher on Tuesday after failing to follow-through to the downside following yesterday’s steep decline. The price action suggests that the sell-off on Monday may have been an overreaction to the news of renewed trade talks between the United States and China. Although the strength in the U.S. Dollar, which fueled most of the selling pressure on dollar-denominated gold, was the right response from gold traders.

At 11:45 GMT, August Comex gold futures are trading $1395.00, up $5.70 or +0.41%.

Trump Tweet Raises Concerns

Gold rebounded on Tuesday mostly in response to a tweet from President Trump that said any deal with China would need to be “somewhat tilted” in favor of the United States. This raised concerns that a deal to end the trade dispute would not go as smoothly as previously thought. Long, drawn out trade negotiations would further weaken the global economy and cause central banks to reduce interest rates. This would be favorable for gold prices.

Trump Threatens New Tariffs on EU Goods

Adding further to the possibility of a global recession was Trump’s threat of tariffs on $4 billion of additional European Union goods in a long-running dispute over aircraft subsidies.

Treasury Yields and U.S. Dollar Major Price Drivers

Based on Monday’s price action, the biggest influence on gold prices remain the direction of U.S. Treasury yields and the U.S. Dollar

Yields rose on Monday in a knee-jerk reaction to the resumption of trade talks. This helped boost demand for the U.S. Dollar, which weighed on dollar-denominated gold prices. Gold price gains will be capped and could fall lower if this relationship continues. However, the dollar was also supported by continuing manufacturing weakness in the Euro Zone. Once again, strong dollar equals weak gold.

Helping to maintain the notion that gold could become rangebound is the thought that Federal Reserve policymakers will do anything to keep the expansion going. This may mean cutting rates at the end of July for insurance against a prolonged economic decline.

Daily Forecast

On Tuesday, the focus should continue to be on the relationship between yields, the dollar and gold prices. There isn’t much in the news, which could mean a rangebound trade. Although there is an early upside bias in the market.

This type of trading could continue all week especially with a U.S. bank holiday on Thursday and the U.S. Non-Farm Payrolls report on Friday. We may not even see the true reaction to the jobs report until Monday when the major market players return from their extended holiday weekend.

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.

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