Price of Gold Fundamental Daily Forecast – Pressured by Easing of Trade Tensions, Stronger U.S. Dollar

Gold futures are trading lower on Friday, but remained in a short-term trading range slightly above a one-year low reached late last week. Driving the market lower is a stronger U.S. Dollar. Traders are shrugging off the mixed performance in U.S. equity markets led by a steep decline in the NASDAQ Composite and rising U.S. Treasury yields.

At 1550 GMT, December Comex Gold futures are trading $1235.00, down $6.00 or -0.48%.

Traders are blaming the easing of trade tensions between the United States and the European Union for the weakness in the market. On Wednesday, following a White House meeting, the two sides agreed to refrain from imposing tariffs on cars from the European Union. They also said they would begin talks to cut other trade barriers.

The direction of the gold market this year has been primarily driven by rising U.S. interest rates, a stronger U.S. Dollar and increased demand for risky assets.

Gold tends to fall when interest rates rise because the precious metal doesn’t pay interest. In fact, gold investors sometimes lose money because of storage costs. Additionally, rising interest rates makes the U.S. Dollar a more attractive investment. When the dollar rises, foreign demand for dollar-denominated gold tends to fall, putting further pressure on prices. Finally, stocks pay a dividend and gold does not, making equities a more attractive alternative than gold.

Currently, the main trend is down. The market isn’t even close to turning the main trend to up. A trade through $1244.70, however, will change the minor trend to up. This will also shift momentum to the upside. This move could encourage weak short-sellers to cover positions. This could drive prices into the next resistance area at $1249.60 to $1256.30.

The inability to take out $1244.70 was the first sign of weakness today. Taking out $1232.90 will be the next. This is followed by $1227.00.