Price of Gold Fundamental Daily Forecast – Strong Equity Indices Weighing on Gold Prices

Demand for risky assets will also influence gold prices. U.S. equity indexes are starting to turn positive in the wake of stronger earnings data from Coca-Cola and United Technologies. A surge to the upside in equities could drive gold prices lower as it approaches a key technical zone at $1272.70 to $1253.00.
James Hyerczyk
Gold Bars and Dollar

Gold futures are trading lower on Tuesday shortly before the regular session opening. Although the equities markets are trending slightly lower in Asia, Europe and the United States, gold traders are reacting as if they expect to see a turnaround in the markets on increased demand for risky assets. The trigger for this will likely be better-than-expected quarterly earnings reports. Gold is also being pressured somewhat by a rise in the U.S. Dollar Index and a slightly reversal to the upside by U.S. Treasury yields.

At 11:32 GMT, June Comex gold futures are trading $1274.30, down $3.30 or -0.26%.

The appeal for gold as a safe-haven asset is being hurt by the attractiveness of U.S. Treasury yields and the strength of the U.S. economy which is encouraging investors to seek shelter in the dollar during times of geopolitical turmoil and when economic weakness shows up in the data of the other major countries.

This year’s strong performance in the global equity markets is also weighing on gold prices. The precious metal is now more than 5 percent off its 2019 peak touched in February. Furthermore, recent better-than-expected economic data from the United States and China have also dampened investor concerns over a steep global economic slowdown. One-by-one, geopolitical fears are being taken away, causing gold speculators to move funds into higher-yielding assets since it doesn’t pay interest or a dividend.

Some gold bulls are holding out hope for geopolitical tensions to rise in the wake of the Trump administration’s move to increase economic pressure on Iran. Others believe that a steep rise in crude oil will support the metal since gold is positively correlated to oil as a hedge against oil-led inflation. However, there is no evidence of that on Tuesday as the precious metal heads toward its lowest level since December 21.

Daily Forecast

It’s going to take a combination of events to reverse the current downside pressure on gold prices. The number one influence on gold prices at this time is the strength of the U.S. Dollar, which is making the dollar-denominated asset a less-desirable investment.

The dollar will continue to strengthen as long as Treasury yields continue to firm on the strength of the U.S. economy. Today, rates will be influenced by the Home Price Index, New Home Sales and the Richmond Manufacturing Index. Weaker than expected data could provide some support for gold.

Demand for risky assets will also influence gold prices. U.S. equity indexes are starting to turn positive in the wake of stronger earnings data from Coca-Cola and United Technologies. A surge to the upside in equities could drive gold prices lower as it approaches a key technical zone at $1272.70 to $1253.00.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.