Price of Gold Fundamental Daily Forecast – Speculators Shedding Positions Ahead of ECB Meeting

Gold futures are trading lower on Thursday after an early rally failed to take out the high hit earlier in the week at $1243.00 despite the worst day of losses in the stock market since 2011. The price action suggests that the flight-to-safety rally may be coming to an end and that the market may have to retreat to value areas in order to attract fresh buyers.

At 0801 GMT, December Comex Gold futures are trading $1234.60, up $3.50 or +0.28%.

Stocks in Asia are mostly lower, but they are the follower, not the leader. All of the selling is related to the weakness during the U.S. session on Wednesday. Europe is also trending lower. U.S. markets on the other hand are rebounding slightly and this may be the catalyst behind the gold market’s weakness.

Furthermore, the slight recovery in the U.S. markets is helping to ease demand for Treasurys as a safe-haven asset. This is helping to push up Treasury yields which tends to make gold a less-desirable asset because the precious metal doesn’t pay a dividend or interest.

Gold prices could also be retreating ahead of today’s European Central Bank (ECB) monetary policy decision. The ECB is scheduled to release its latest monetary policy statement at 1145 GMT. It’s not expected to make any changes.

At ECB President Mario Draghi’s press conference following the statement, traders will be looking for comments on the simmering spat between the European Union and the Italian government. On Wednesday, Italian Finance Minister Giovanni Tria said that he sees no reason to present a new budget, after the European Commission said the plan was not good enough and wanted a new version within three weeks’ time.

The U.S. Dollar Index will rise if the Euro continues to weaken. This could lead to selling pressure on gold prices.

Gold traders will also get the opportunity to react to a number of U.S. economic reports on Thursday. The major report is on durable goods. Core Durable Goods Orders are expected to have risen 0.5%, up from 0.0%. Durable Goods Orders are expected to have fallen 1.3%, down substantially from last month’s 4.4% decline.

The Goods Trade Balance is expected to come in slightly better at -74.9 billion, up from -75.5 billion. Preliminary Wholesale Inventories are expected to have risen 0.5%. Pending Home Sales are expected to come in 0.1% lower.

Weekly Unemployment Claims are forecast at 214K, up slightly from last week’s 210K.

FOMC Members Clarida and Mester are also scheduled to speak.

It looks as if the ECB Monetary Policy Statement, Draghi’s press conference and stock market volatility will be the main catalysts on Thursday. The ECB is important because the news will affect the U.S. Dollar which will have an influence on gold prices. Stock market volatility has an effect on the dollar, interest rates and demand for gold as a safe-haven asset.