Price of Gold Fundamental Daily Forecast – Pressured by Higher Yields, Increased Demand for Higher Risk Assets

The reactions in the Treasury and stock markets today indicate that this week-end’s G-7 meeting was a non-event. If rates continue to rise as well as stocks then demand for risky assets will keep the pressure on gold prices.
James Hyerczyk
Comex Gold
Comex Gold

Gold is trading lower after an earlier attempt to break out to the upside failed to gain traction. Gold moved higher early in the session in reaction to a weaker U.S. Dollar. The Greenback was pressured by the lack of progress at last week-end’s G-7 conference.

At 0851 GMT, August Comex Gold futures are trading $1300.40, down $2.30 or -0.18%.

In other news, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.46 percent to 828.78 tonnes on Friday, the lowest ince February 22.

Additionally, speculators cut their net long position in COMEX gold by 3,169 contracts to 58,066 contracts in the week to June 5, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.

Forecast

Today’s two-sided trade could be the norm this week as investors prepare for a slew of U.S. economic data and several central bank meetings.

The focus may be on U.S. Treasury yields today due to the 10-year Bond Auction. At 1701 GMT, the Treasury is expected to release the results of the auction. The previous report showed an interest rate of 3.00 percent and a bid-to-cover ratio of 2.6.

Gold could be pressured late in the session if the yield is above 3.00 percent. September 10-year U.S. Treasury note yields are currently trading higher before the futures market opening. This is probably helping to cap and pressure gold prices today.

Looking ahead, gold could feel further pressure from moderating geopolitical risks ahead of the U.S.-North Korea summit. Tuesday’s U.S. reports on consumer inflation could also keep traders on the sidelines late in the session.

Investors are looking for the CPI to come in at 0.2%. This report is not expected to affect this week’s Fed interest rate decision, which has already been priced into the market. However, a much stronger than forecast report could mean a more aggressive Fed later this year.

The reactions in the Treasury and stock markets today indicate that this week-end’s G-7 meeting was a non-event. If rates continue to rise as well as stocks then demand for risky assets will keep the pressure on gold prices.

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