Price of Gold Fundamental Daily Forecast – May Be Fairly Priced, Due for Correction into Value Zone

Gold is inching lower on Friday on below average volume ahead of the long U.S. holiday weekend. The market is also trading inside yesterday’s range which suggests investor indecision and impending volatility. The market is in a position to close lower for the week after touching a multi-year high on Monday. The price action suggests the selling may be greater than the buying at current price levels.

At 11:39 GMT, December Comex gold is trading $1534.50, down $2.40 or -0.15%.

In my opinion, gold has been treading water since August 13. Although it eventually moved from $1546.10 to $1565.00, most of the price action since that date has been sideways. This suggests that gold may be fairly priced.

Keep in mind that since August 13, we’ve had an escalation of the trade war between the United States and China and a prolonged inversion of the yield curve, a highly followed recession indicator. However, gold prices have moved lower.

The price action also tells me that traders are having a hard time buying strength and may be looking for value. Without trader willingness to chase this market higher at current price levels, we could be setting up for a short-term correction into a value area. If gold posts a potentially bearish closing price reversal top this week then we can start watching for a 2 to 3 week correction with the first value zone target $1488.50 to $1470.50.

Fundamentally, gold traders have already priced in a 25-basis point rate cut by the U.S. Federal Reserve in September. The inverted 2-year/10-year Treasury yield curve may be signaling a future recession for some, but there are other factors like the job market that have to start weakening to confirm the economy is moving in that direction.

Tensions between the U.S and China escalated last Friday, but since then both sides have calmed down and have scheduled the resumption of trade talks for the first Thursday in September.

Finally, expectations of aggressive stimulus moves by the European Central Bank are weighing on the Euro, driving the U.S. Dollar higher against a basket of currencies. The stronger U.S. Dollar is making dollar-denominated gold a less-desirable investment.

Daily Forecast

Trader reaction to last Friday’s close at $1537.60 should be watched carefully today. Taking out this level will be a sign of weakness. Look for an acceleration to the downside if sellers can take out $1527.00. Our best value area at this time is $1488.50 to $1470.50.