Price of Gold Fundamental Daily Forecast – Pressured by Safe-Haven Demand for Dollar, Treasurys

Gold is under pressure early Monday in reaction to a stronger U.S. Dollar. The Greenback is being supported by flight-to-safety buying amid weakness in the global equity markets. This is further evidence that investors no longer consider gold to be a safe haven asset. Investors seeking projection from a stock market sell-off are moving money into the U.S. Dollar and U.S. Treasury yields instead of gold.

At 0605 GMT, August Comex gold is trading $1250.50, down $3.90 or -0.30%.

On Friday, gold formed a technical reversal bottom and finished higher for the first time in five sessions, however, based on today’s early price action, this move was likely fueled by profit-taking and position squaring rather than a shift in investor sentiment. Further supporting this assessment is today’s lack of follow-through to the upside.

In economic news, gold continues to be pressured by expectations of additional rate hikes by the Fed amid an improving economy. Rising interest rates tend to make gold a less-desirable investment because it pays no interest.

On Friday, the so-called Core Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred gauge of U.S. inflation, rose 2.0 percent from a year earlier, the biggest gain since April 2012. This news helped raise the chances of at least one more Fed rate hike this year, and possibly two.

In other gold-related news, the U.S. Mint sold 19,500 ounces of American Eagle gold coins in June, down 18.8 percent from the previous month. Additionally, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.18 percent to 819.04 tonnes on Friday.

Finally, speculators cut their net long positions in COMEX gold and silver contracts in the week to June 26, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.

Forecast

Gold is likely to remain under pressure today as long as investors continue to move money into the safety of the U.S. Dollar and U.S. Treasurys.

The catalyst behind the flight-to-safety buying is likely to be demand for risk. Therefore, the key indicator of direction today is likely to be the movement in the U.S. equity markets.

Taking out last week’s low at $1246.90 will signal a resumption of the downtrend. This would put the market in a position to challenge a bottom not seen since July 7, 2017 at $1230.70.