Price of Gold Fundamental Daily Forecast – Supported by Forecasts for Weaker Global Economy

Gold futures are trading higher on Monday on low volume. The strength is being fueled by a weaker U.S. Dollar and thin trading conditions due to a U.S. bank holiday. Prices are hovering near a two-week high after rebounding from a two-week low last week. The dampening of concerns over trade talks is encouraging traders to exit U.S. Dollar hedge positions, which is driving up demand for dollar-denominated gold.

At 11:13 GMT, April Comex gold futures are trading $1327.10, up $4.90 or +0.37%.

The Chicago Mercantile Exchange is closed today as well as the Comex exchange due to a U.S. bank holiday. Volume is expected to be extremely low, but this could lead to increased volatility. Trading is taking place on the electronic platform. It’s scheduled to close early today.

Gold has been resilient lately despite a stronger U.S. Dollar, rising Treasury yields and increased demand for higher risk assets. I think the demand is coming from investors reacting to forecasts for a weaker global economy. Since the first of the year, several major central banks have turned dovish along with the U.S. Federal Reserve. Since gold doesn’t pay interest or a dividend, it tends to become more valuable during periods of lower interest rates.

Gold traders haven’t showed much of a reaction to the sharp rise in the U.S. Dollar Index because that move has been primarily driven by a steep drop in the Euro. Since the first of the year, the dollar has actually been trading lower against the Australian, New Zealand and Canadian Dollars so in my opinion, the dollar index hasn’t been reflecting the true trend in the greenback. I also think gold investors recognize this and have been supporting the market on price dips.

This week, the Fed will release the minutes from its January meeting. At this meeting, policymakers flipped to dovish after releasing a hawkish monetary policy statement in December. If the Fed minutes, due to be released on Wednesday afternoon, are dovish then gold prices could spike to the upside over its high for the year at $1331.10.