Price of Gold Fundamental Daily Forecast – Stronger Dollar Could Drive Gold into Value Area

Barring any escalation of the trade dispute between the U.S. and China, there isn’t much on the schedule that could move prices sharply higher. We could see a retracement of today’s earlier break at some time during the week, but I think investors will be looking for value and the best opportunity for a buy will come when the market is testing $1313.70 to $1304.40.
James Hyerczyk
Comex Gold and U.S. Dollar

Gold prices plunged on Monday, dropping more than 1% in the early trade as worries over escalating U.S. trade disputes were dampened after an agreement between the United States and Mexico led to the postponement of U.S. tariffs that were expected to kick in today. Most of the selling pressure was related to profit-taking by traders who bought gold as protection against stock market weakness.

At 10:02 GMT, August Comex gold is trading $1332.10, down $14.00 or -1.04%.

The market could get a little tricky this week because the 12 day, $78.10 rally was fueled by numerous factors.

The emotional investors, who bought for so-called “safe-haven” reasons, are probably bailing out of the precious metal today. They were banking on the 5% tariffs against Mexican imports to hurt the U.S. economy. Now that a deal is in place, these investors have no reason to hold onto the asset.

The steep sell-off doesn’t mean the rally is over, however, since it was primarily driven by a steep drop in U.S. Treasury yields and a change in trend to down in the U.S. Dollar. A weak dollar tends to drive up foreign demand for dollar-denominated gold.

Since gold is an investment and not really a “safe-haven” asset, the next buy is likely to be fueled by value-seekers. Given the 12-day range of $1274.60 to $1352.70, the best value zone is $1313.70 to $1304.40. A move back into this zone is likely to offer the best buying opportunity.

We want to continue to look for buying opportunities because of the weaker dollar. It is likely to remain under pressure until the Fed either cuts rates or announces that the economy is stable enough to keep interest rates at current levels. The next Fed two-day meeting is scheduled for June 17-18.

Daily Forecast

The only report on Monday is JOLTS Job Openings. It is expected to come in at 7.50 million, slightly better than the 7.49 million reported last month. Later this week, traders will get the opportunity to react to reports on Consumer Inflation and Retail Sales.

Most importantly, the Fed members are on lockdown so we’re not going to hear anything from the central bank policymakers until after next week’s Fed meeting.

Barring any escalation of the trade dispute between the U.S. and China, there isn’t much on the schedule that could move prices sharply higher. We could see a retracement of today’s earlier break at some time during the week, but I think investors will be looking for value and the best opportunity for a buy will come when the market is testing $1313.70 to $1304.40.

Most of the price action this week will be driven by Treasury yields, appetite for risk and the direction of the U.S. Dollar.

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