Price of Gold Fundamental Daily Forecast – Look Out to Downside if $1322.60 Fails as Support

Gold prices rebounded from earlier losses on Tuesday as the dollar pulled back from a four-month high and demand for higher risk assets fell. The move in gold came as a surprise as it took place even as the benchmark 10-year U.S. Treasury yield broke through 3 percent for the first time in more than four years.

June Comex Gold futures settled the session at $1333.00, up $9.00 or +0.68%.

Investors aren’t reading much into the price action since it looks like it was all short-covering, fueled by a successful defense of the previous main bottom at $1322.60. In other words, this rally is not likely to amount to much unless a support base is build or the fundamentals change drastically.

Since gold is a dollar-denominated asset, it’s not likely to move much higher unless the dollar weakens significantly and that’s not likely to occur unless there is a dramatic downturn in U.S. Treasury yields and the outlook for higher U.S. inflation.

Forecast

Gold prices are trading sharply lower early Wednesday and the market has nearly erased all of yesterday’s gains. All it took was a recovery in the U.S. Dollar and an upturn in U.S. stock index futures to attract sellers.

At 0740 GMT, June Comex Gold is trading $1325.30, down $7.70 or -0.58%.

Several factors should continue to keep a lid on gold prices including the rising 10-year U.S. Treasury note which breached the psychological 3 percent level on Tuesday. Strong U.S. economic data and diminished geopolitical tensions should also help keep a lid on gold prices.

On Tuesday, U.S. consumer confidence rebounded in April and new home sales increased more than expected in March, pointing to underlying strength in the economy despite signs that growth slowed in the first quarter.

Additionally, President Trump on Tuesday said the United States would likely reach a trade agreement with China and that officials from both sides would sit down for negotiations in a few days.

Trump also said on Tuesday that North Korean leader Kim Jong Un had been “very honorable” and discussions on a planned summit were going well, but tempered expectations for any quick denuclearization deal by saying “it may be we’re all wasting a lot of time.”

There aren’t any major economic releases on Wednesday, but investors should continue to watch U.S. interest rates, the dollar and the stock market. Technically, traders will be paying close attention to gold’s reaction to $1322.60 because if it fails, the market could drop to $1312.40 to $1309.30 fairly quickly.