Price of Gold Fundamental Daily Forecast – Set Up for Volatile Move as Traders Await Next Catalyst

Gold futures are trading flat shortly before the regular session opening on Friday as traders try to make sense of a number of mixed economic news that have held prices in a tight range for much of the week. Traders are saying gold is being supported by fresh coronavirus-led lockdowns in Europe and on dovish policy cues from the U.S. Federal Reserve, while gains are being capped by firm Treasury yields.

At 12:41 GMT, February Comex gold futures are trading $1847.70, down $3.70 or -0.20%. This is down from an intraday high of $1856.60.

Helping to provide some confusion for traders is the higher U.S. Dollar, which is trading slightly under its high for the week. Traders were hoping that the dollar would weaken after President-elect Joe Biden unveiled his economic relief plan on Thursday night because a weaker dollar is good for gold prices, but that didn’t happen. This is probably because it will be weeks before the plan is debated in Congress as Washington politicians deal with the distractions of a second impeachment of President Trump.

Coronavirus Concerns

Traders are concerned about the failure to get to the other side of the pandemic after months of celebrating the creation of a number of vaccines. The vaccine rollout is not moving fast enough for some, which is helping to create a bid in the market.

Furthermore, tighter lockdowns in Germany and France as well as new COVID-19 restrictions in China cut into optimism about a global economic recovery.

Gains Capped by Firm Benchmark Yields

Despite the market being underpinned by COVID concerns, buyers are not chasing gold higher because benchmark 10-year Treasury yields remain close to 10-month highs reached earlier in the week. This is helping to support the U.S. Dollar, which is dampening foreign demand for dollar-denominated gold.

Fed’s Powell Provides Some Support for Gold

The gold market found some support from comments from the U.S. Federal Reserve Chairman on Thursday after he suggested no change in interest rates. U.S. Federal Reserve Chair Jerome Powell said an interest rate hike would not be coming anytime soon and pushed back against suggestions that it might taper bond purchases.

Daily Forecast

Gold prices are consolidating because the fundamentals are mixed. In other words, there are no strong catalysts to push prices in either direction at this time. The chart pattern suggests volatility may be just around the corner, however.

In order to get gold prices moving to the upside it’s going to need help from Treasury yields and the U.S. Dollar. Yields are going to have to start declining and the dollar is going to have to resume its downtrend.

We may not get a clear signal on either until the Fed meets at the end of the month. Therefore, a prolonged sideways trade is a strong possibility.