Price of Gold Fundamental Daily Forecast – Renewed Stock Market Weakness Could Drive Prices to $1284.10
Gold futures are recovering from early session weakness and are in a position to open the regular session higher. The rebound rally is being fueled by a combination of factors including lower Treasury yields, a weaker U.S. Dollar and lower demand for risky assets. These are the same markets that helped drive gold off its six-month high on Wednesday.
At 1229 GMT, February Comex gold is trading $1276.00, up $3.00 or +0.23%.
Hedging against a stock market decline helped drive gold prices to their highest level since July 9 on Wednesday, but the market retreated from this high after the Dow Jones Industrial Average posted its biggest one-day gain in history. Despite pulling back nearly $10 from its intraday high, the market was still able to finish the session on the plus side.
Today’s early price action suggests that sellers have returned to the stock market and that yesterday’s rally was a one-time event. Gold traders will continue to take their cues from the three factors that have been supporting this current rally the past nine days – lower yields, a weaker dollar and a volatile stock market.
The catalysts behind these moves remain the same. Traders are treating gold as a safe-haven market because of the partial-government shutdown, uncertainty over the direction of U.S. interest rates, the lingering trade dispute between the U.S. and China and increased expectations of a U.S. recession.
Look for gold to be underpinned today if sellers return to the stock market.
There is also growing evidence of aggressive buying in the cash market which is providing support. According to some analysts, there has been an extensive surge in gold exchange traded fund holdings. With this move, investors are preparing for several uncertainties heading into 2019.
Yesterday, it was reported that investors are moving money into gold at a rapid pace. This was reflected in a surge in the holdings of SPDR Gold, the largest traded fund. SPDR holding rose 2.1 percent on Wednesday, their best one-day percentage gain since July 2016.
Furthermore, SPDR holdings are at their highest level since August, having risen about 8 percent since touching more than 2-1/2-year lows in October.
Cash market buying of gold is a strong sign of higher prices to follow.