Price of Gold Fundamental Daily Forecast – Struggling Despite Lower Treasury Yields

Gold futures are trading flat shortly before the regular session opening. The market is also trading inside yesterday’s price range. This means that there was nothing in the news overnight to draw the attention of buyers or sellers. It usually indicates investor indecision, but is also often a pre-cursor to volatility. Contrarian traders believe the inside move is sign that short-term traders are preparing to transition from bullish to bearish. All we can do is watch it play out, but trading volume could offer a clue as to what the bigger players are thinking.

At 11:56 GMT, December Comex gold futures are trading $1988.30, up $2.00 or +0.10%.

Gold is currently hovering just below the previous session’s all-time high as fears over the pace of the economic recovery continue to pressure U.S. Treasury yields. Remember, it’s not the headline driving gold prices, but rather the headlines influence on U.S. Treasury yields. Simply stated, interest rates down, gold up and interest rates up, gold down.

Economic News

Gold traders are still assessing the impact of the better-than-expected manufacturing PMI reports released on Monday in China, the Euro Zone and the United States. The improving numbers and gold trader reaction to the news, suggests short-term traders are taking a “wait and see” approach as they await fresh news that could lead to record low rates, while fueling another surge in gold prices.

Improving economic data will only have a negative impact on gold prices if it triggers a surge in short-term yields.

U.S. Coronavirus Aid

The passing of a new bill in Congress to provide more stimulus to U.S. consumers is a little tricky for gold traders. I think that this issue has already been priced into the gold market. Traders expect the move to be made, however, they aren’t sure of the size of the package.

Right now, gold traders are pricing in about $1 trillion in federal aid.  A bigger than expected stimulus package could spike gold prices, but prices could retreat if policymakers give investors what they are expecting.

Daily Forecast

Gold is likely being underpinned by higher U.S. government debt prices which means rates are inching toward another record. Gains are likely being capped because of the volatility in the U.S. Dollar.

A short-squeeze in the dollar could provide trouble for gold if investors decide it’s a big enough concern to encourage profit-taking. A short-term correction actually wouldn’t be a bad development. Besides, the market has looked a little sluggish since hitting a record high on July 28 at $2000.00.

From high to high, December Comex gold has only gained $9.50. At this time, it’s trading about $9.00 lower from the first high and $18.20 below yesterday’s high. Putting it all together, I see a rangebound to lower trade over the near-term.

For a look at all of today’s economic events, check out our economic calendar.