Price of Gold Fundamental Daily Forecast – Needs Support from Drop in Yields, Lower Demand for Risk, Weaker Dollar

Gold prices settled lower after trading mostly sideways throughout the session. The market was underpinned by trade war concerns, but gains were limited by the rise in U.S. Treasury yields. Gold traders didn’t show much of a reaction to the movement in the U.S. Dollar.

August Comex gold settled at $1297.30, down $2.00 or -0.15%.

The U.S. Dollar Index was down with most of that loss attributed to a stronger Euro and the commodity-linked Australian and New Zealand Dollars. The Euro continued to be supported by the easing of the political turmoil in Italy. Increased demand for risky helped drive the rally in the Aussie and Kiwi. Rising Treasury yields supported the Dollar/Yen.

U.S. Treasury yields rose on Monday as investors continued to react to Friday’s strong U.S. jobs report. A solid increase in average hourly earnings helped solidify a June Fed rate hike, while increasing the chances of two more rate hikes after that in 2018.

There was only one report on Monday, new orders for U.S.-made goods fell more than expected in April. According to the Department of Commerce, Factory Orders fell 0.8 percent for April, while data for March was revised upward to 1.7 percent. Traders had forecast orders falling 0.5 percent.

There wasn’t much movement in gold despite reports of a weaker dollar because the sum of all the fundamentals was still bearish.

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Forecast

Gold is trading lower early Tuesday. Traders are reacting to a stronger U.S. Dollar and firm equity markets. Treasury futures are trading higher which means interest rates are lower. This may be underpinning gold, preventing an extension of last week’s sell-off.

At 0738 GMT, August Comex gold is trading $1295.40, down $2.00 or -0.15%.

We’re going to be watching yields today because they seem to be the best indicator of direction. The mixed performance by the U.S. Dollar against various currencies can cause some confusion for traders.

Traders will get the opportunity to react to a number of U.S. reports today, but they’ll only move the gold market if they change the direction of Treasury yields.

The first minor report is Final Services PMI. It is expected to come in unchanged at 55.7. The next minor report is JOLTS Job Openings. Traders are looking for a reading of 6.49M versus 6.55M. IBD/TIPP Economic Optimism is expected to come in slightly better at 54.2.

The major report is ISM Non-Manufacturing PMI. Traders are looking for a reading of 57.9. This should beat the previous 56.8.

If gold is going to rally, it’s going to need help from several factors. Firstly, U.S. Treasury yields have to drop. Secondly, demand for risky assets has to decline and the U.S. Dollar is going to have to continue to weaken. Otherwise, we’re likely to continue to trade sideways to lower.

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