Price of Gold Fundamental Daily Forecast – Supported by Commodities Surge, Pressured by Appetite for Risky Assets

Gold futures hit a one-week high on Wednesday, helped by technical buying and some safe-haven demand despite a stronger U.S. Dollar and increased demand for higher risk assets. Prices were also supported by general strength in the commodities market, helped by a surge in crude oil prices and key industrial metals.

June Comex Gold futures settled at $1352.40, up $2.90 or +0.21%.

Gold traded lower early in the session but recovered enough to surge through a key technical area at $1352.50. The current price action suggests the market may be building a new higher bottom at $1335.50 which will be strong sign that buyers are still coming in on the dips.

Additionally, palladium prices rose on fears of Russian supply disruptions after the recent U.S. sanctions on shareholders of Nornickel, the world’s largest producer.

The steep rise in crude oil and strategic metals such as aluminum and copper helped drive the CRB Commodities Index higher. This also encouraged commodity money managers to buy gold against a possible surge in inflation.

Forecast

Gold is trading higher early Thursday, but inside yesterday’s range. This suggests investor indecision and impending volatility. An easing of geopolitical tensions, rising Treasury yields and increased appetite for risk may be helping to limit the markets gains while an improving outlook for a surge in inflation may be underpinning the market.

At 0509 GMT, June Comex Gold futures are trading $1354.70, up $1.20 or +0.09%.

Gold buyers seem a little tentative about taking the lead during this particular commodities-driven rally. However, they do seem to be willing to follow crude oil and other industrial metals higher because this is may be where the hedge fund money is going.

Crude oil and metals such as aluminum, palladium and copper have a narrative behind their respective rallies which makes it easier for money managers to follow their developing bullish stories. Gold, on the other hand, doesn’t have a bullish story providing support at this time.

So while gold may piggyback the rallies in crude oil and the other bullish industrial metals, I don’t see a powerful surge coming unless U.S. interest rates top out, appetite for risk declines or the dollar resumes its sell-off.