Price of Gold Fundamental Daily Forecast – Supported by Weaker Yields, Stocks; Gains Capped by Stronger U.S. Dollar

Gold futures are edging lower on Wednesday shortly after the regular session opening. The market is trading inside yesterday’s range which tends to indicate investor indecision and impending volatility. Traders are getting mixed signals today with stocks and Treasury yields under pressure and the U.S. Dollar moving higher. Some traders are attributing the early weakness to profit-taking, while others are saying the market remains bid due to the uncertainty surrounding the formal impeachment inquiry into President Trump.

At 12:11 GMT, December Comex gold is trading $1533.70, down $6.50 or -0.42%.

Formal Impeachment Inquiry

The move by the House Democrats to begin a formal impeachment inquiry into Trump’s role in seeking foreign help to smear Democratic rival Joe Biden ahead of next year’s election is potentially bullish for gold because it creates uncertainty. This tends to drive investors out of risky assets like stocks and into safe-haven assets like Treasury bonds.

If Treasury bonds rise then yields will fall, making the U.S. Dollar a less-attractive investment. A weaker dollar tends to drive gold prices higher because of increased foreign demand. That’s the textbook response, but sometimes investors treat the dollar as a safe-haven buy, which should dampen demand for gold. That could be what we’re looking at today.

Gold traders may be seeking some clarity over the direction of the dollar before picking a direction.

Bullish Investors Hoping for Uncertainty

Bullish gold traders are hoping the impeachment inquiry consumes the President, making it harder for him to cut a deal with China on trade. We saw yesterday that gold is sensitive to any news regarding U.S.-China trade relations.

On Tuesday, Trump reiterated that he would not accept a “bad deal” in U.S.-China trade negotiations. This sent stocks lower and gold higher.

U.S. Consumer Confidence Falls

On Tuesday, gold was supported by a larger-than-expected drop in U.S. consumer confidence. The move was fueled by increasing concerns over the global economy. It essentially renewed talk of the need for an October rate cut by the Federal Reserve, which the market is currently not expecting. At this time, traders believe the Fed will pass on an October rate cut and reduce its short-term rates again in December.

Daily Forecast

There aren’t any major reports today so traders are likely to react to any new impeachment developments. Trump is expected to release the transcripts of his phone call with the Ukraine President, which could either clear the President or make the situation worse for him. This news should drive the price action in gold.

Falling yields and stocks should underpin gold with a firm dollar putting a cap on gains. If yields rise along with stocks then look for gold to be pressured.