Price of Gold Fundamental Daily Forecast – Strengthening Dollar, Higher Yields Makes Gold Vulnerable to Steep Break

The lack of safe-haven demand, higher yields and increased demand for risky assets should keep a lid on gold prices today. A potential upside breakout by the U.S. Dollar could also trigger a plunge in prices. Not only is the dollar being supported by rising rates and safe-haven demand, but weakness in the Euro and British Pound are also contributing to a firmer greenback.
James Hyerczyk
Gold Bars and Dollar

Gold futures are edging lower on Tuesday, hovering just above a key retracement level at $1272.70 and its low for the year at $1267.30. The market is being pressured by a stronger U.S. Dollar, which is being supported by firmer U.S. Treasury yields. The “risk-on” scenario in the stock market is also weighing on demand for dollar-denominated gold.

At 11:00 GMT, June Comex gold futures are trading $1274.80, down $2.50 or -0.20%.

Dollar Supported by Rising Yields, Safe-Haven Demand

The U.S. Dollar is being underpinned by safe-haven demand due to escalating tensions between the United States and China. The recent surge in prices is being fueled by rising Treasury yields.

Treasury yields are firming because of increasing bets that the U.S. Federal Reserve will not cut interest rates. Traders are saying that recent comments from Fed officials indicate the central bank may not be as dovish as expected.

Recent data continues to support what the Fed has been saying all year that its interest rate decisions will be data-driven. Furthermore, remarks from Fed officials suggest that policymakers are not ready to bring an end to their tightening cycle.

Dollar Also Boosted by Weaker Currencies

Not only is the dollar being supported by rising rates and safe-haven demand, but weakness in the Euro and British Pound are also contributing to a firmer greenback. The Euro is being pressured by worries over upcoming European parliamentary elections and lingering political turmoil in Italy. The British Pound is being driven lower by Brexit issues. As these currencies fall, the dollar rises, making gold expensive for foreign buyers.

Powell Speaks, Gold Capped

Late Monday, Fed Chairman Jerome Powell said it was “premature” to ascertain the impacts of trade and tariff on the trajectory of monetary policy instead enunciating that recent economic data pointed towards a healthy supply side.

Essentially, the yields rose and the dollar strengthened because Powell did not provide clear hints of a rate cut this year.

Daily Forecast

The lack of safe-haven demand, higher yields and increased demand for risky assets should keep a lid on gold prices today. A potential upside breakout by the U.S. Dollar could also trigger a plunge in prices.

Technically, prices could accelerate to the downside if the 50% level support is violated at $1272.70. If this creates enough downside momentum then look for the move to possibly extend into the low for the year at $1267.30. The next major target under this price is $1253.00.

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