Price of Gold Fundamental Daily Forecast – Rebounding Dollar Exerting Pressure as Yields Chop Around

Gold futures are trading lower on Thursday, but inside yesterday’s trading range. Gains are being capped by a rebound in the U.S. Dollar, while a dip in interest rates is providing some support. The volume is well-below average with the major players on the sidelines until after the first of the year, so we are preparing for heightened volatility.

At 11:10 GMT, February Comex gold futures are trading $1802.30, down $3.50 or -0.19%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $168.58, down $0.06 or -0.04%.

Traders Eyeing Treasury Yields

U.S. Treasury yields jumped Wednesday as investors continue to monitor developments on the Omicron COVID variant. The yield on the benchmark 10-year Treasury note surged 7.2 basis points at 1.553%, while the yield on the 30-year Treasury bond jumped 6.4 basis points to 1.966%.

Early in the session on Thursday, the 10-year Treasury yield held above 1.5%, but has since succumbed to pressure, dropping down to 1.534%. The 30-year Treasury yield also dipped to 1.95%.

The choppy movement in yields is being reflected in the gold market, which has posted a two-sided trade overnight.

In addition to the “virus-on”, “virus-off” trade and the soaring Omicron infections, traders are also saying the Federal Reserve is on the sidelines.

Dollar Rebound Weighs on Foreign Demand for Gold

The early price action in the stock market suggests risk is back on, and this is helping to drive up demand for the higher-yielding U.S. Dollar. A rising dollar tends to weigh on foreign demand for dollar-denominated gold.

The weaker Euro is giving the dollar index its biggest boost in mostly an interest rate play. The Fed is preparing to raise rates, while the European Central Bank (ECB) is expected to remain dovish over the near-term.

US Economic Data

On the data front, initial jobless claims are due out at 13:30 GMT while a December Chicago PMI will come out at 14:45 GMT.

Weekly Unemployment Claims are expected to come in at 205K, matching last week’s number. Chicago PMI expected to come in at 61.9, up slightly from the previously reported 61.8.

On Wednesday, the U.S. goods trade deficit hit a record in November, the Commerce Department reported. The international trade deficit was $97.8 billion in November, up $14.6 billion from $83.2 billion in October, according to the department.