Price of Gold Fundamental Daily Forecast – Shift in Investor Sentiment Leads to Position-Trimming

Gold futures are trading lower on Friday shortly before the regular session opening as investors aggressively moved funds into riskier assets in response to news of U.S. President Donald Trump’s plans to restart the U.S. economy and promising early results related to a potential COVID-19 treatment.

Global equity markets rallied on the news of Trump’s plan calling for a gradual reopening of the U.S. economy, offsetting the worries over data showing China suffered its worst quarterly economic contraction on record.

At 12:09 GMT, June Comex gold is trading $1712.50, down $19.20 or -1.11%.

Gold traders also reduced positions after a report detailing encouraging data from trials of U.S. drugmaker Gilead Sciences Inc.’s experimental drug remdesivir in severe COVID-19 patients.

Additionally, the U.S. Dollar Index rose to near a one-week high, further reducing demand for dollar-denominated gold.

Short-Term Outlook

We’ve written several times that gold is going to be volatile, and the trading two-sided over the short-run, but bullish over the long-run. This is one of those cases.

Given the current optimistic developments, investors are choosing to chase the higher-yielding assets, while downplaying the need for gold. Investors see less need to increase their holdings in gold so they are converting to U.S. Dollars and stocks.

However, stock traders may be celebrating prematurely because no one knows if the promising drug’s stats will hold up when tested on a wider audience, or whether Trump’s plan to re-open the economy will be successful.

If both prove to be unsuccessful then gold will move back higher over the short-term.

Longer-Term Outlook

Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement. So as long as the fiscal and monetary stimulus remains in place, gold is likely to be underpinned over the long-run.

Therefore, while gold may be pressured over the short-run, it could eventually fall back into a long-term value area that could be attractive to buyers. The key to trading gold at this time is to know whether you are a short-term trader or a long-term investor.