Price of Gold Fundamental Daily Forecast – Stock Market Weakness, Volatility Will Feed Rally

Gold is soaring on Tuesday and in a position to take out last week’s high as global stock market weakness drives investors to seek protection in the safe-haven asset. Geopolitical tensions are also helping to underpin gold prices as investors are being forced to deal with political tensions between Saudi Arabia and Western powers, uncertainties surrounding Brexit and lingering budgetary issues between Italy and the European Union.

At 0806 GMT, December Comex Gold is trading $1237.00, up 12.40 or +1.01%.

After a steady opening, gold picked up strength when Asian stock markets opening lower. There was no particular event fueling the selling pressure. The price action suggests investors are expressing caution amid rising global tensions.

On Monday, gold was mostly pressured by a 4.1% rally in China’s Shanghai Composite. However, this move lasted only one session suggesting it was fueled by profit-taking rather than new short-selling.

On Tuesday, the Greater China markets were trading lower. Hong Kong’s Hang Seng index fell 2.03 percent while China’s Shanghai Composite and Shenzhen Composite declined 1.37 percent and 1.229 percent respectively. Japan’s Nikkei 225 was down 2.44 percent while the Topix Index fell 2.36 percent.

All three major U.S. futures indices were also trading lower during their pre-market session and in a position to challenge their lows for the month.

Forecast

After consolidating in a tight range for over a week, gold is finally breaking out to the upside early Tuesday. The size of the rally today will likely be determined by the volatility and the direction of U.S. equity markets as well as whether the breakout is being fueled by short-covering, new buying or a combination of the two.

The first resistance at $1235.80 has been overtaken. If the upside momentum continues then the buying is likely to extend into at least $1246.30. This is a major upside target and a potential trigger point for an acceleration into $1264.90 over the near-term.

There are no major economic releases today so the price action will be dictated by investor demand for risk. Shortly before the regular session gold and stock market openings, it looks as if today will be a “risk-off” session which means gold is likely to remain underpinned all day.