Price of Gold Fundamental Daily Forecast – Optimism Ahead of Trade Talks, Firm Dollar Weighing on Gold

Gold is under pressure shortly before the regular session opening as traders react to a firm U.S. Dollar, rising Treasury yields and a pre-market turnaround in U.S. equity futures.

Gold finished higher last week, but the move was a little deceiving. Heavy selling pressure drove the market lower early in the week as the chances of a Fed rate cut at the end of October hit 20%. Prices, however, turned around suddenly on October 1, following the release of a disastrous ISM Manufacturing PMI report and a weaker-than-expected ISM Non-Manufacturing PMI report on October 2. This news fanned the flames of recession, while driving the chances of a Fed rate cut to 93.5%.

Traders gave back more than half of the week’s gains on Friday following the release of a “solid” U.S. Non-Farm Payrolls report. This news is carrying over into the gold market on Monday. Comments from Federal Reserve Chairman Jerome Powell on Friday could also weighing on gold prices since he didn’t seem to be too concerned about the economy, nor did he endorse a rate cut at the end of the month.

In the U.S. on Monday, Fed Chair Jerome Powell is scheduled to deliver a speech at 17:00 GMT.

On Friday, Powell described the U.S. economy as being solid, noting the central bank must do what it can to keep it there.

“While not everyone fully shares economic opportunities and the economy faces some risks, overall it is – as I like to say – in a good place,” Powell said in prepared remarks delivered at a “Fed Listens” event in Washington. The event is part of a monetary policy communication review by the Fed. “Our job is to keep it there as long as possible.”

Powell further added, “While we believe our strategy and tools have been and remain effective, the U.S. economy, like other advanced economies around the world, is facing some longer-term challenges – from low growth, low inflation, and low interest rates,” Powell said, adding the Fed is “examining strategies” that will help it achieve its inflation goal of 2%.

Daily Forecast

We’re looking for gold to trade sideways to lower on Monday unless there is a dramatic plunge in stocks and Treasury yields.

Traders seem to be hedging their bets against a bad outcome from the U.S.-China trade talks by buying the U.S. Dollar. The rising dollar is also driving down foreign demand for dollar-denominated gold.