Price of Gold Fundamental Daily Forecast – Steep Drop in Dollar/Yen Triggers Gold Surge

A steep drop in the U.S. Dollar against the Japanese Yen triggered a spike to the upside in gold, sending the safe-haven asset to its highest level in nearly four months. The dollar has been under pressure against the Japanese Yen since early Tuesday when the Bank of Japan announced a move to trim its long-dated government bond purchases.

At 1321 GMT, February Comex Gold futures are trading $1322.10, up $8.40 or +0.64%.

Although the move by the BoJ lifted bond yields all around the world, which is usually a negative for gold prices, the impact of the dollar’s fall outweighed this factor.

As you can see from the gold chart, prices fell the last two days as investors adjusted to the rising yields. However, the volatility in the Dollar/Yen caused this relationship to flip overnight.

It’s obvious from the price action in the correlated asset classes – gold, the dollar, Treasurys and the stock market – investors in higher-yielding assets like stock are shifting money into lower-risk assets like gold. It’s not a major move at this time, it’s just a short-term position-adjustment.

However, it could develop into a major trend changer over the near-term, depending on how aggressive the BoJ is in adjusting its stimulus package. Therefore, we have to expect increased volatility until the financial markets settle down.