Price of Gold Fundamental Daily Forecast – Pressured after Trump Pledges Government Stimulus

Increased demand for risky assets is helping to drive gold futures lower on Tuesday. Traders are shedding positions in gold just one day after the market reached a multi-year high at $1704.30.

Gold traders are reacting to rising global yields in the United States, Germany and Japan, as well as higher equity markets in Asia and Europe. U.S. stock index futures are also trading higher, pointing toward a strong cash market opening.

At 09:20 GMT, April Comex gold is trading $1662.00, down $13.70 or -0.83%.

The U.S. Dollar is also returning from the dead on Tuesday on the hopes of new fiscal stimulus. The rising U.S. Dollar is making dollar-denominated gold more expensive to foreign buyers.

Trump Pledges New Stimulus Measures

President Trump said on Monday he will be taking “major” steps to insulate the economy against the impact of the coronavirus outbreak and reduce some of the fears that have driven U.S. equity markets to nearly bear market territory in just three weeks after posting record highs. Among the stimulus measures that Trump will discuss with congressional Republicans on Tuesday is payroll tax relief.

Stock Futures Surging

Helping to put downside pressure on gold is an early surge in U.S. stock futures on Tuesday after the S&P 500’s worst day since the financial crisis over 10 years ago.

At 09:00 GMT, futures on the blue chip Dow Jones Industrial Average indicated an opening rally of more than 900 points on Tuesday. The benchmark S&P 500 Index futures and the NASDAQ Composite Index also pointed to a sharply higher open for the two indexes on Tuesday.

U.S. government Treasury yields are higher on Tuesday as investors made a re-entry into risky assets after driving the U.S. 10-year Treasury note and the 30-year Treasury bond yields to record levels the previous session. The move is also bringing investors back to the U.S. Dollar, reducing gold’s appeal as an investment.

Daily Forecast

Trader demand for risky assets, rising Treasury yields and a stronger U.S. Dollar will be the recipe for lower gold prices on Tuesday. The first objective for sellers will be $1634.20 to $1617.60. Buyers could show up on a test of this area, but if $1617.60 fails as support then look out to the downside. The next major target will then become $1581.40 to $1552.40.

Continue to keep in mind that gold is an investment, and not a safe haven asset. It competes for investment dollars like stocks. However, stocks pay a dividend, which make them more attractive that gold over the long run.