Price of Gold Fundamental Daily Forecast – Price Action Indicates Investors Leaning Toward Short-term Shutdown

Gold futures are trading lower early Monday, showing little reaction to the flat U.S. Dollar and the U.S. government shutdown.

At 0800 GMT, April Comex Gold futures are trading $1335.70, down $2.30 or -0.17%.

The U.S. government is preparing for a shutdown for the third day as the dispute between the Republican and President Trump and the Democrats over immigration.

Over the week-end, the Senate failed to strike a deal to break an impasse before the work week starts in Washington.

On Monday, Senate Majority Leader Mitch McConnell will move to advance a stopgap spending bill at 1700 GMT, he said Sunday night, but Senate Minority Leader Chuck Schumer objected as Democrats still had not seen enough progress in talks on issues like immigration to move forward.

Additionally, according to CNBC, speaking on the Senate floor Sunday night, McConnell called for an end to the shutdown and outlined what appeared to be assurances to Democrats, who have nearly all opposed the short-term GOP proposals to keep the government running. McConnell has pushed for a bill to fund the government through February 8, which House Republicans also largely back.

In other news, the U.S. Commodity Futures Trading Commission (CFTC), which showed that hedge funds and money managers had raised their net long position in COMEX gold contracts in the week to January 16.

Forecast

Few expect the government shutdown to last too long, but if it extends beyond a week, it could start having an effect on the economy especially at first quarter GDP. If this drives the U.S. Dollar lower, then it should help support gold prices. However, rising U.S. Treasury yields should put a lid on prices.

Ultimately, it comes down to whether the news shifts investor interests from higher-risk assets to lower-risk assets. This may happen over the short-term, but I don’t see it derailing the stock market rally, for example.

The daily chart shows clearly what investors are thinking. The market is currently trading inside the $1349.20 to $1329.10 range. Its 50% level or pivot is $1339.20. This price is controlling the direction of the market.

A sustained move over $1339.20 will indicate the presence of buyers. They will be betting on a long-term shutdown.

A sustained move under $1339.20 will signal the presence of sellers. They will be betting on a short-term government shutdown.