Price of Gold Fundamental Daily Forecast – Supported by Possibility of New Fiscal, Monetary Stimulus

James Hyerczyk
Published: Jul 19, 2020, 09:55 GMT+00:00

Treasury yields dipped on Friday and Gold rose – That should be the headline.


Comex gold futures rose on Friday and finished higher for the sixth consecutive week as surging coronavirus cases raised the possibility of additional fiscal and monetary stimulus. Investors aren’t buying gold because COVID-19 cases are rising, per se. If they were then the precious metal would be spiking higher everyday along with the cases in the United States.

On Friday, August Comex gold futures settled at $1812.10, up $11.80 or +0.66%.

Since reaching its contract high at $1829.80 on July 8, gold has closed lower 4 out of 7 sessions. It was even trading lower on Friday before buyers came in to turn the market higher. That’s hardly the price action of a highly desirable safe-haven asset.

I suggest you read the price action and not the headlines, and draw your own conclusions. Yes, the underlying long-term trend is up, but the short-term trend remains vulnerable. Furthermore, since its April top, most of the profits have been made by buying dips rather than strength, so be careful chasing the market higher unless the government or the Fed announces new stimulus.

COVID-19 Cases and the Economy

As I mentioned earlier, it’s not the jump in coronavirus cases that’s supporting gold prices, it’s the possibility of additional stimulus from the government and the Fed. Their primary concerns are that the surge will prompt some U.S. states to partially shut again, raising fears the economy and labor market will continue to struggle.

Other Potentially Bullish Factors

Gold is also being supported by the rise in U.S.-China tensions because investors fear another surge in sanctions and tariffs could weigh on the economic recovery in both countries. The derailment of the economic recovery would likely prompt the governments and central banks in both countries to consider additional ways to shore up their respective economies and prevent a prolonged recession.

Ultimately, Treasury Yields Determine Gold’s Direction

Treasury yields dipped on Friday and Gold rose – That should be the headline. The yield on the benchmark 10-year Treasury note fell under 0.60 percent, while the yield on the 30-year Treasury bond slipped to around 1.2975%.

An unexpected drop in U.S. consumer sentiment and the continuing rise in new coronavirus cases appeared to weigh on risk sentiment, as more businesses look likely to shut up shop – at least temporarily – as the virus’ spread looks set to continue.

This news drove investors into the true safe-haven – U.S. Treasury bonds. However, as rates inched closer to zero percent, non-yielding gold became a more attractive investment.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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