Price of Gold Fundamental Daily Forecast – Starting to Show Signs of “Risk-Off” Sentiment

With yields dipping and the Japanese Yen inching higher, the price action in gold suggests that today may actually develop into a “risk-off” day.  This is understandable since it’s been about a week since the yield curve inverted, signaling a recession, and the news hasn’t been all that supportive for the start of rebound in the global economy.
James Hyerczyk
Comex Gold

Gold futures are trading a little better shortly before the regular session opening after recovering from early session weakness. The selling was a little tentative early as Treasury yields failed to follow-through to the upside after firming on Monday. However, gold started to gain traction once the U.S. stock markets dipped lower for the session.

At 10:42 GMT, December Comex gold is trading $1514.10, up $2.50 or +0.16%.

With yields dipping and the Japanese Yen inching higher, the price action in gold suggests that today may actually develop into a “risk-off” day.  This is understandable since it’s been about a week since the yield curve inverted, signaling a recession, and the news hasn’t been all that supportive for the start of rebound in the global economy.

Furthermore, we could be looking a profit-taking and position-squaring ahead of the release of the Fed monetary policy meeting minutes on Wednesday and Friday’s key speech from Federal Reserve Chairman Jerome Powell on Friday.

Both events are expected to offer gold traders some insight as to just how aggressive the Fed is willing to be in combating the threat of a recession.

Daily Forecast

The fundamentals for gold continue to be supportive with the trade war between the United States and China still grabbing the headlines. I have to admit, I was expecting more of a pullback in gold into a value area before a turnaround. I felt that there are too many traders going along for the ride and that perhaps some of the major players would’ve wanted to knock the weaker longs out of the market.

My first downside target zone and value area is $1479.10 to $1463.10. We could still get there. It all depends on how traders respond to the short-term pivot at $1517.50.

There are no major events scheduled today, however, traders should be prepared for any surprise news from China or the United States. In fact after Tuesday’s session, I think all gold traders will be interested in is what the Fed minutes show on Wednesday and what Fed Chief Powell has to say on Friday. This could lead to an interesting trade with alternating periods of slow activity and heightened volatility.

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