Price of Gold Fundamental Daily Forecast – Safe-Haven Demand Supportive, Stronger Dollar Capping Gains

Gold is trading lower on Wednesday in reaction to a surge in the U.S. Dollar against a basket of major currencies. The Greenback is being supported by a steep plunge in the Australian Dollar and further weakness in the Euro. However, gains are being limited by a rise in the Japanese Yen.

At 10:37 GMT, April Comex gold is trading $1317.70, down $1.50 or -0.11%.

Gold is also posting an inside move for a second session. This typically indicates investor indecision and impending volatility. The indecision is being fueled by buyers fearing another government shutdown and sellers banking on the Fed to take another look at the so-called “weakening economy”. Some are speculating on a future event, while others are looking at real numbers.

Demand for gold as a safe-haven asset picked up late Tuesday after President Trump’s State of the Union address when he failed to excite investors about key issues such as ending the trade dispute between the United States and China. Furthermore, Trump didn’t say much to excite the bulls in the stock market, but may have stoked some fears as he vowed to build a wall between the U.S. and Mexico border.

Trump also offered little clarity over the on-going trade negotiations between the U.S. and China, which ended last week. After offering upbeat comments at the end of the discussions, Trump failed to follow-through on Tuesday with similar comments.

In his speech, Trump said any trade agreement with China “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.”

Trump continued to push for the building of the wall despite huge opposition from the Democrats. He said the border wall was needed to stem illegal immigration and smuggled drugs, but stopped short of declaring the issue a national emergency. In continuing to talk about building the wall, Trump raised concerns over the risk of another government shutdown. This was enough to send investors into the safety of the gold market.

Finally, Trump also briefly mentioned budget issues, but provided investor few surprises, leading to early session weakness in the stock market. Lower demand for risk was also supportive for gold.

The selling pressure today is being fueled by a stronger U.S. Dollar. The greenback is garnering support from a steep drop in the Australian Dollar after the Reserve Bank of Australia said it would consider cutting interest rates.

Daily Forecast

Today’s early inside move suggests investors are waiting for news. Throughout the week, the market has been pressured by rising U.S. Treasury yields as investors made adjustments in anticipation of a possible rate hike by the Fed later in the year. However, Treasury yields are dropping today as investors take some protection against another potential government shutdown. This is helping to support gold.

Gold could continue to trade rangebound while investors sort out the details of these two events. However, as the deadline for the next government shutdown approaches, gold could pick up a bid which drives it back towards the multi-month high reached last week.

On the data front, traders will get the opportunity to react to the latest news on U.S. Preliminary Nonfarm Productivity, Preliminary Unit Labor Costs and the Trade Balance. The latter is expected to come in at -54.0 billion, slightly better than the previously reported -55.5 billion.

Late in the day, FOMC Member Quarles will speak, followed by Fed Chair Jerome Powell. Traders will be looking to hear if Powell changes his tune a little about a weakening economy in light of Friday’s blow-out jobs report.

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