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James Hyerczyk
Gold Bars and Dollar
Gold Bars and Dollar

Gold prices are trading higher shortly before the U.S. opening on Friday. The market is being supported by falling U.S. Treasury yields and a weaker U.S. Dollar. Lower demand for higher risk assets is also helping to make gold a more attractive investment today. The catalyst behind the price action is concern over an escalating trade war between the United States and China.

At 1100 GMT, December Comex Gold is trading $1212.30, up $7.20 or + 0.61%.

Gold traders are also hedging their risks ahead of the long U.S. holiday week-end and the possibility that the NAFTA deal may not go through due to trade issues with Canada. According to reports, negotiators from Canada and the United States made a late-night push for a new NAFTA deal without a deal. President Trump has set an August 31 deadline to get a new deal completed or Canada could face further trade sanctions.

Other stories that gold traders are watching deal with trade issues. U.S. President Donald Trump threatened in an interview with Bloomberg News on Thursday to withdraw from the World Trade Organization, his latest salvo in a deepening dispute between the United States and its major trading partners.

Additionally, Trump is prepared to ramp up a dispute with China and has told aides he is ready to impose tariffs on $200 billion more Chinese imports as early as next week, Bloomberg reported on Thursday.

Forecast

Thin-trading conditions ahead of the U.S. Labor Day holiday on Monday may be giving aggressive speculators a chance to manipulate the long side of the market early Friday. Furthermore, there is evidence that hedgers may actually be buying some insurance over the weekend to protect themselves just in case of an equity market meltdown.

It’s been a while since we’ve seen money move into gold for protection ahead of stock market sell-off so this could be a sign that investors are changing their opinions about gold being a safe-haven asset.

Despite gold’s strong performance since August 15, it’s still poised to continue its longest monthly losing streak since 2013. Prices are down about 1.3 percent so far this month, on track for a fifth straight monthly decline.

Due to the thin trading conditions, it’s going to take a lot of volume to drive gold out of its short-term trading range. The buying is going to have to be strong enough to take out $1215.10, and the selling strong enough to break through $1205.90. Otherwise, prices could just side inside this range throughout the session.

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