Price of Gold Fundamental Daily Forecast – Short-Term Pain as Dollar Rebounds on Safe-Haven Buying

Gold is under pressure on Wednesday, dragged down by lower demand for riskier assets and renewed buying of the safe-haven U.S. Dollar. Today’s price action indicates that gold is still trading lock-step with U.S. equity prices, an unusual reaction that began in early March when investors were forced to sell gold to raise money to meet stock market margin calls.

At 13:02 GMT, June Comex gold is trading $1743.70, down $25.20 or -1.42%.

U.S. Dollar on the Rise

Limiting gold’s appeal, the dollar index rose 0.6% against a basket of major currencies. Demand for the greenback picked up after the International Monetary Fund said the global economy was expected to shrink by 3% in 2020 because of the pandemic, in the worst downturn since the Great Depression of the 1930s.

Long-Term Outlook – Bullish

Gold tends to benefit from widespread stimulus measures from central banks, and is often seen as a hedge against inflation and currency debasement. Lower interest rates also reduce the opportunity cost of holding non-yielding bullion.

That being said, gold is not likely to have a meaningful break or a change in the longer-term trend until the major central banks start reeling in their stimulus money or start raising rates, and that is not expected for over a year.

Short-Term Outlook – Volatile, Two-Sided Trade

Small corrections due to profit-taking are likely to be the norm. The size of the corrections will be largely dependent on demand for U.S. Dollars.

Additionally, the movement in the equities will also influence gold prices as long as there is fear of renewed margin call selling. We’re not going to truly have a normal gold/stock market relationship until the two assets diverge.

Other News

U.S. retail sales suffered a record drop in March as mandatory business closures to control the spread of the novel coronavirus outbreak depressed demand for a range of goods.

Retail sales plunged 8.7% in March, the biggest decline since the government started tracking the series in 1982, after falling a revised 0.4% in February, the Commerce Department said.

Additionally, the Empire State Manufacturing Index hit -78.2, worse even than the -32.5 expected by economists surveyed by Dow Jones.