Price of Gold Fundamental Daily Forecast – Renewed Evergrande Uncertainty Fueling Two-Sided Response

Gold is trading higher but in a tight range on Friday after a drop in Treasury yields drove investors into the non-yielding asset. Gains are likely being capped by a stronger U.S. Dollar. The catalysts behind Friday’s price action are renewed concerns over the fate of China’s Evergrande debt payments.

At 11:43 GMT, December Comex gold is trading $1752.50, up $2.70 or +0.15%.

Today’s price action suggests traders may have moved on from yesterday’s weakness that was fueled by Wednesday’s hawkish comments from the Fed regarding the timing of its tapering plans and its first rate hike.

It’s hard to tell at the moment if gold traders are turning into buyers because of the warning from China to local authorities over a possible collapse of Evergrande or sellers because of the prospects of rate hikes from several central banks.

Gold is trading nearly flat this week despite heightened volatility. This suggests traders aren’t sure about how to play the uncertainty over Evergrande, which has been driving investors into the safety of the U.S. Dollar and other themes ranging from the Fed’s tapering and rate hike expectations.

Ultimately, it all comes down to the direction of interest rates and to some extent the U.S. Dollar. When they aren’t moving in the same direction, gold traders have a hard time figuring out which direction they want to lean on. This tends to lead to low volume, which tightens up the trading range.

Evergrande Stays Silent on its $83 Million Dollar Bond Interest Payment, Leaving Investors in Limbo

Clearly, the Evergrande debt problem is not going to go away anytime soon and is likely to remain a concern headed into the weekend. This could be the source of volatility throughout today’s session especially into the close.

Chinese property developer Evergrande has not said whether it will fulfil its interest payments on its U.S.-dollar bond- a key milestone investors have been keeping their eyes on.

The interest payment due Thursday amounted to $83 million. It was for a $2 billion dollar-denominated bond that’s due to mature in March 2022. Dollar bonds are typically held by foreign investors.

As of Friday morning during Asia hours, the company had not made any announcement, or any filing to the Hong Kong exchange, leaving investors in limbo.

Evergrande has warned it may default on its debt. Investors are watching the developments closely, amid fears of contagion that could spread to other markets.

Chinese authorities have reportedly told local officials to prepare for Evergrande’s potential demise, according to The Wall Street Journal.

Gold traders should get ready to do the volatility dance with Evergrande debt payments due each month in October, November and December.