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James Hyerczyk
Gold Bars and Dollar
Gold Bars and Dollar

Gold is trading higher early Wednesday but inside yesterday’s range. This suggests investor indecision and impending volatility. It could also be an indication of a transition in consumer sentiment from bearish to bullish.

The catalysts underpinning gold prices are lower Treasury yields and a weaker U.S. Dollar. A recovery in the Euro is also helping to support gold prices.

At 0543 GMT, December Comex Gold is trading $1193.60, up $2.10 or +0.18%.

U.S. 10-year and 30-year Treasury yields fell on Tuesday in choppy trading, as investors took profits and covered shorts in T-note and T-bond futures markets. Earlier in the day, yields hit multi-year highs following recent economic data and on interest rate prospects over the next 18 months.

In other news, the IMF cut global economic growth forecasts for 2018 and 2019, as well as its U.S. and China estimates for next year, saying the two countries would feel the brunt of their trade war next year.

In economic news, it was another light day on Tuesday with the NFIB Small Business Index coming in at 107.9, below the 108.9 forecast. The IBD/TIPP Economic Optimism reading was 57.8, well above the 54.6 estimate.

Forecast

Today’s U.S. Producer Price Index (PPI) report could move the gold market. It is expected to show a monthly increase of 0.2%, up from the previously reported -0.1%. Core PPI is also expected to show a rise of 0.2%, also up from -0.1%.

Final Wholesale Inventories are estimated to have risen 0.8%. The Treasury also holds a 10-year auction today. Additionally, the Treasury could release its Currency Report, in which it is expected to name currency manipulators.

Traders will be watching the PPI data because it needs to justify the surge in Treasury yields. Lower than expected PPI could drive Treasury yields lower. This would pressure the U.S. Dollar which would make dollar-denominated gold a more attractive investment.

The daily chart indicates that taking out $1195.40 with strong buying volume could spike the market about $10 higher, or into $1205.90.

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