Price of Gold Fundamental Daily Forecast – Struggling as COVID Fears Subside, Risk Appetite Climbs
Gold futures finished lower on Friday as firmer yields, a stronger U.S. Dollar and higher equity prices weighed on demand for the non-yielding dollar-denominated asset. Reports of higher inflation aren’t driving demand for gold like many had expected. The bullish tone in the stock market and recent plunge in Treasury yields are just two examples supporting the Fed’s notion that the rise in inflation is temporary or “transitory”.
On Friday, December Comex gold settled at $1805.90, down $3.30 or -0.18%.
After showing some early strength at the start of the week, demand for gold subsided as fears over rising Delta variant COVID-19 cases have eased, prompting investors to move out of the so called safe-haven asset as risk appetite returned.
It is suggested that you refrain from trading the COVID-related headlines, this can only get you into trouble. Keep an eye on the Treasury yields and the U.S. Dollar. They are the main catalysts driving the price action.
Kitco Metals’ Analyst Hints at Weakness
“The gold market is seeking out a fresh fundamental driver and there really isn’t one,” said Jim Wyckoff, senior analysts with Kitco Metals, noting weaker real yields and a jump in COVID-19 cases were not enough to move prices higher.
“Technical traders are taking over because of the lack of fundamentals and gold’s near-term technical posture has turned negative, inviting some traders to short the market,’ Wyckoff added.
Treasury Yields, US Dollar Set the Tone
Treasury yields climbed on Friday to finish the week higher, rebounding from the previous session. The yield on the benchmark 10-year Treasury note added 3 basis points, climbing to 1.288%. The yield on the 30-year Treasury bond gained 2 basis points, rising to 1.927%.
Treasury yields rebounded having fallen in Thursday’s session, after jobless claims data came in higher than expected. The number of first-time unemployment insurance claims filed last week came in at 419,000, versus the 350,000 filings expected by economists.
US Business Activity Cools Further in July – IHS Markit Survey
U.S. Business activity grew at a moderate pace for a second straight month in July amid supply constraints, suggesting a cooling in economic activity after what was expected to have been a robust second quarter.
Daily firms IHS Markit said on Friday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to a four-month low of 59.7 from 63.7 in June, A reading above 50 indicates growth in the private sector.
The market focus now turns to next week’s U.S. Federal Reserve meeting after the European Central Bank on Thursday pledged to keep interest rates at record lows for some time.
While no Federal Reserve policy changes are expected in July’s meeting, we could hear more about the tapering discussions that started in June, ING Analysts wrote. The volume surrounding this issue is likely to be turned up at the August Jackson Hole conference with the risks remaining skewed towards earlier policy normalization that that the Fed is currently signaling.
CONTRARIAN ALERT: Holdings in New York’s SPDR Gold Trust, the largest gold-backed exchange-traded fund (ETF), were at their lowest in more than two months on Thursday. Have the last of the weaker bullish traders thrown in the towel? Will new buyers show up?