Price of Gold Fundamental Daily Forecast – Shedding of Safe-Haven Dollar Positions Will Be Supportive

Gold futures are trading slightly higher after giving back most of its earlier gains. A rebound rally in the U.S. Dollar is helping to generate the downside pressure. Gold may have hit a short-term low last week, but gains have been limited this week by the combination of a stronger U.S. Dollar, rising Treasury yields and firm demand for higher risk assets.

At 11:10 GMT, April Comex gold is trading $1314.10, up $0.10 or +0.01%.

Gold was trading higher earlier in the session in reaction to a weaker U.S. Dollar. The greenback was being pressured by the unraveling of safe-haven long positions created by recent concerns over U.S.-China trade relations and worries about a government shutdown.

However, traders have calmed a little since the start of high level talks between the two economic powerhouses began earlier in the week, and after Washington announced a deal had been struck to avert a government shutdown.

The problem for gold bulls is the dollar right now. Traders get the correlation trade, where a weak dollar makes dollar-denominated gold a more attractive asset. That trade worked fine when the greenback was being pressured by the dovish Federal Reserve.

However, trading conditions began to change nearly two weeks ago when several central banks also turned dovish on global economic growth. Furthermore, concerns over China’s economy were recently raised after it announced weak GDP. Additionally, the International Monetary Fund (IMF) lowered its outlook for the global economy. Furthermore, last week, the European Commission slashed its forecast for growth in 2019.

With all this negative news about the global economy piling up, the dollar became a more attractive asset and demand for gold fell.

Daily Forecast

The direction for gold on Wednesday will continue to be influenced by the direction of the U.S. Dollar. The greenback will strengthen and gold will weaken if investors once again express concerns over U.S.-China trade relations. Additionally, the deal to avert the government shutdown could hit a snap or President Trump could change his mind about signing the bill into law. Based on recent performance, this would also send investors back into the safe-haven U.S. Dollar.

Gold best chance at a rally over the near-term will be increasing optimism over a trade deal. This news will likely send the dollar lower as investors shed their safe-haven buys.

Later today at 13:30 GMT, gold traders will get the opportunity to react to the latest U.S. consumer inflation data. CPI is expected to have risen 0.1% and Core CPI is expected to have increased by 0.2%.

Since the Fed said last month that it thought inflation was “muted”, a jump in consumer inflation would come as a surprise.

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