Price of Gold Fundamental Daily Forecast – Prices Could Weaken if Trump Gives in to Political Pressure Over Tariffs

Gold prices rose to their highest level since February 27 early Monday before settling lower for the session. Investors bought gold early in the session as a protectionist measure against political uncertainty in Italy and on fears of a global trade war in reaction to President Trump’s announcement of tariffs on imported steels and aluminum.

April Comex Gold futures settled at $1319.90, down $3.50 or -0.26%.

The easing of tensions over Italy and the possibility of a trade war helped boost the dollar, driving down gold into the close. Increased demand for higher risk assets also pressured prices.

The dollar was primarily underpinned by an easing of tensions over a possible trade-war in retaliation to last week’s announcement by President Trump of proposed 25-percent and 10-percent tariffs on imported steel and aluminum.

Early Monday, Trump may have opened the door for negotiations on tariffs when he sent out a series of tweets suggesting he remains flexible on the idea.

Trump’s tweets stated, “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.” Adding that “Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done.”

In other news, House Speaker Paul Ryan said he was “extremely worried” about Trump’s trade plan. Congressional leaders, meanwhile, will not rule out potential action if Trump decides to move forward with his tariff plan.

Final Services PMI came in at 55.9, matching expectations. ISM Non-Manufacturing PMI was 59.5, better than the 58.9 estimate, but below last month’s 59.9 read.

Additionally, Federal Reserve Vice Chairman Randal Quarles said U.S. financial regulators are working quickly to make “material changes” to the Volcker Rule, one of Wall Street’s most hated post-crisis restrictions.

Forecast

Gold prices are inching higher early Tuesday on the back of a weaker U.S. Dollar. Traders moved back into gold amid worries about a global trade war even as U.S. President Trump faced pressure from political and trade allies over his plan for steel and aluminum tariffs.

At 0628 GMT, April Comex Gold futures are trading $1324.30, up $4.40 or +0.33%.

While the weaker U.S. Dollar may be supporting prices, rising stock prices in Asia may be putting some pressure on the market.

Traders are also saying that Mexican and U.S. officials are pushing to speed up NAFTA negotiations, with the United States floating the idea of reaching an agreement “in principle” in coming weeks to avoid political headwinds later this year.

The direction of gold will be determined by the U.S. Dollar. Gold prices are likely to retreat on Tuesday if equity prices and Treasury yields continue to rise. This is likely to occur if Trump gives in to pressure to rescind his plans to implement a tariff on steel and aluminum.

If Trump continues to push forward with his plans and turns into a protectionist president then look for the trade-war to begin with retaliation from Asia, Europe and Canada expected over the near-term. This should weaken the dollar and make gold a more attractive asset.