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James Hyerczyk
Comex Gold

Gold futures are trading slightly lower and inside yesterday’s trading range. The chart pattern suggests investor indecision and impending volatility. Prices are being pressured by demand for risky appetite and rising Treasury yields, but a lower U.S. Dollar Index is providing some support. The catalyst behind today’s price action is improving data from China, which indicates its economy may have bottomed out as government stimulus begins to kick-in.

At 10:38 GMT, June Comex gold futures are trading $1279.00, up $1.70 or +0.13%.

Gold is currently lower for the year and threatening to move even lower as it hovers near a four-month low. Support for the sometimes investment and sometimes safe-haven asset is rapidly eroding as investors seek a better return in income producing assets like Treasurys and equities.

The headline driving the price action today is the news that China’s economy grew at a steady 6.4% during the first quarter, better than expectations for a 6.3% gain. The data strongly suggests that Chinese government stimulus may have trickled through the economy and is now producing dividends.

Signs of progress in U.S.-China trade negotiations and strong U.S. economic data are also weighing on gold prices. A trade deal at this time would alleviate further strain on the global economy. Solid U.S. economic data has also taken concerns over a U.S. recession and a U.S. Federal Reserve interest rate cut off the table, putting further pressure on demand for gold.

Daily Forecast

Gold is trending lower and the daily charts indicate it has further downside potential with $1268.90 the next likely target. I could build a case for a short-covering rally if buyers can overcome $1285.50.

The direction for gold today will likely be influenced by the direction of the U.S. Dollar, Treasury yields and U.S. equity prices. The U.S. Dollar is being primarily driven by the movement in the Euro. Treasury yields will be driven by expectations of continuing U.S. economic growth. Equities are being driven by earnings.

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