Price of Gold Fundamental Daily Forecast – Margin-Call Selling, Fed Stimulus Fueling Massive Price Break

Gold is getting crushed on Friday, and in a position to finish its worst week in more than three years. Once again stock market volatility is forcing the major players to raise cash to meet margin calls and they are selling gold to cover the calls. Higher Treasury yields and a rapidly rising U.S. Dollar against a basket of major currencies are also weighing on gold prices.

Once again the brokers guided the lemmings into “safe-haven” gold. And for the third time this year, they paid the price for not realizing that gold is an investment, not a safe-haven asset. We saw this in January when the U.S. killed an Iranian general. We saw it two weeks ago during the first wave of stock market selling and we’re seeing it again. The first time was the wake-up call. If you were caught on the wrong side the second time then that’s just not being smart.

At 17:13 GMT, April Comex gold is trading $1521.90, down $68.40 or -4.30%.

Treasury Yields Jump as Fed Details Stimulus Plans

Treasury yields jumped on Friday as the Federal Reserve stepped up its stimulus measure to counter signs of market dysfunction in the face of the spreading coronavirus.

At 17:20 GMT, the benchmark U.S. 10-year Treasury Note yield is at 0.941, up 0.089 and the U.S. 30-year Treasury Bond yield is at 1.564, up 0.153.

The moves in the bond market followed the Federal Reserve’s announcement of its bond-buying program as part of its efforts to help the financial system through the coronavirus scare.

The central bank said Friday it will start buying Treasurys across all durations, starting with the 30-year bond. Yields at the long end of the curve jumped following the announcement.

In addition to the new round of bond purchases, the Fed also previously detailed a series of longer-term repo operations that could amount to $1.5 trillion. Repo involves banks swapping high-quality assets for reserves they use to fund daily operations.

U.S. Dollar Surges Against Basket of Currencies

The dollar rallied on Friday, gaining sharply versus the Japanese Yen, as stock markets rebounded and investors welcomed signs that governments and policymakers were prepared to do more to tackle the economic shock of the coronavirus.

The greenback extended gains against several currencies after a blowout in swap spreads on Thursday signaled that investors want dollars. While those spreads came in on Friday, the dollar held strong. This pressured dollar-denominated gold by driving down foreign demand for the precious metal.