Price of Gold Fundamental Daily Forecast – Rising Yields, Demand for Risk Fueling Long Liquidation

Gold futures are trading lower as progress in U.S.-China trade talks and the announcement of a Brexit extension weighed on the market’s appeal as a safe-haven asset. However, losses are being limited ahead of this week’s U.S. Federal Reserve interest rate and monetary policy decisions. Another surge in U.S. Treasury yields and increasing demand for risky assets is also weighing on gold prices.

At 12:58 GMT, December Comex gold is trading $1500.20, down $5.10 or -0.33%.

Trade News Bearish

Speculative buyers are exiting positions and short-sellers may be increasing pressure in anticipation of the announcement of a partial trade deal between the U.S. and China after the U.S. Trade Representative’s office said on Friday that the two countries were “close to finalizing” some parts of a trade agreement.

On Saturday, China’s Commerce Ministry said both side have agreed to properly address core issues, according to a Reuters report. The ministry said in a statement both side have confirmed that the U.S. will import cooked poultry from China, while Beijing will lift a ban on U.S. poultry.

Brexit Extension Bursts Speculative Bubble

Traders hoping for further confusion over Brexit were dealt a blow after the European Union announced an extension with the United Kingdom over Brexit.

According to reports, European Council President Donald Tusk announced the bloc’s decision Monday morning on Twitter. The U.K. will now be able to leave the EU at any point before January 31 providing British Prime Minister Boris Johnson can secure approval from Parliament on his exit deal.

Furthermore, Johnson’s government on Sunday increased pressure on opposition leaders to hold an early general election in December in order to break the long-standing impasse in the U.K.’s Parliament over Brexit.

Fed Rate Cut Priced In

On Wednesday, the U.S. Federal Reserve is widely expected to cut its benchmark interest rate 25-basis points. Traders priced this in about 2 weeks ago. As of Monday morning, the CME Group’s Fed Watch Tool showed there is a 90.4% chance of this rate cut.

Gold traders aren’t worried about this cut, but they are likely to react to any news that signals an additional rate cut in December. This news could stop a price slide or trigger a short-covering rally.

Treasury Yields, Stocks Up; Gold Down

The Fed may be cutting rates, but Treasury yields are rising because long bond traders are liquidating long hedge positions because of improving risk conditions. Demand for stocks is also weighing on gold by reducing its importance as a safe-haven asset.

Daily Forecast

The bearish factors are lining up so gold may be under pressure throughout the session. Unless there is unexpected bad news about the trade deal, gold is going to have a hard time recovering from today’s early weakness especially since some of the Brexit concerns have been lifted.

Gold may have to test the major value zone at $1489.10 to $1471.00 before new buyers show up to stop the price slide.