Price of Gold Fundamental Daily Forecast – Supported by Weaker Dollar, Lower Demand for Risk

Signs of a global economic slowdown and a weaker U.S. Dollar are helping to underpin gold prices on Monday. Weaker-than-expected trade data from China is behind the increased concerns over a weakening global economy and the dovish Federal Reserve is pressuring the U.S. Dollar. Both events are actually working hand-in-hand to support higher gold prices because the Fed said in its minutes that it could pause its plans to raise rates if the global economy is showing signs of weakness.

At 1028 GMT, February Comex gold is trading $1294.20, up $4.70 or +0.36%.

China Trade Data Boosts Demand for Gold

According to government data released earlier in the session, China’s trade surplus with the U.S. grew 17 percent from a year ago to hit $323.32 billion in 2018. According to Reuters, that’s the highest on record dating back to 2006. Still, overall Chinese trade surplus last year was the lowest since 2013, even though export growth was the highest since 2011, the news agency reported.

Exports to the U.S. rose 11.3 percent on-year in 2018, while imports from the U.S. to China rose a meager 0.7 percent over the same period.

China’s overall trade surplus for 2018 was $351.76 billion, the government said. Exports in the whole of 2018 rose 9.9 percent from 2017 while imports grew 15.8 percent over the same period, official dollar-denominated data showed.

Dovish Fed Pressures Dollar, Driving Up Demand for Gold

The recently release minutes of its December monetary policy meeting showed that U.S. Federal Reserve policymakers were growing more concerned about a weakening global economy and excessive financial market volatility.

The minutes also showed a more cautious Federal Reserve would be more patient when considering rate hikes in 2019. Although the central bank said in its last monetary policy statement, that is projects at least two rate hikes this year, the financial markets aren’t pricing in any rate hikes. Furthermore, several Fed officials said last week that they don’t support raising rates at this time.

The comments from the Fed are putting pressure on the U.S. Dollar. Since gold is a dollar-denominated commodity, demand for gold tends to increase when the greenback weakens.

Forecast

A weak dollar and lower demand for risky assets should underpin gold prices today. The trend is up, but the market has been rangebound for more than a week. This suggests investor indecision and impending volatility.

The first support is $1278.10. Holding above $1289.20 will indicate the buying is getting stronger. If there is a jump in buying volume then we could see a test of this year’s high at $1300.40.