Price of Gold Fundamental Daily Forecast – Surging in Reaction to Fed’s Massive Measures to Support Economy

Gold is posting another sharp rise on Tuesday, hitting its highest level since March 12, in reaction to an unprecedented move by the Fed and in anticipation of a major stimulus package from the U.S. government that should flood the systems with U.S. Dollar. Too many dollars will weaken the greenback and drive up demand for dollar-denominated gold.

At 09:46 GMT, June Comex gold is trading $1638.00, up $65.30 or +4.15%.

The early price action also shows that gold is still maintaining its direct relationship with U.S. equity prices although Monday’s move provided a little confusion for traders. On Tuesday, the benchmark S&P 500 Index is up about 5% in the early session, while gold is enjoying a more than 4% increase.

Fed’s Cash Infusion Fuels New Gold Rush

Gold futures are up sharply on Tuesday, extending gains from the previous session, after the U.S. Federal Reserve’s extraordinary measures to help an economy reeling from the coronavirus pandemic halted a rush for cash.

The U.S. central bank on Monday rolled out an unprecedented array of programs and will lend against student loans, credit card loans, and U.S. government backed-loans to small businesses.

Gold Traders Betting on Government Stimulus Package

An all-encompassing coronavirus economic stimulus package remained stalled in the U.S. Senate on Monday as lawmakers haggled over its provisions, but the U.S. Treasury Secretary voiced confidence a deal would be reached soon.

Treasury Secretary Steven Mnuchin, the Trump administration’s point person on coronavirus legislation, shuttled in and out of Senate leaders’ offices.

“I think we’re very close,” Mnuchin told reporters. “We’re trying to finish it up tonight.”

Daily Forecast

Cash, cash and more cash is good for gold prices especially when that cash is the U.S. Dollar. Gold is a dollar-denominated commodity so when the dollar weakens, demand for gold tends to rise. Traders are betting on this phenomenon in a big way after the Fed’s measures and ahead of the Senate vote on Tuesday.

Bullish gold traders are hoping the U.S. Dollar falls as fast as it rallied recently, once investors realize the supply of greenbacks is no longer tight.

“The U.S. Senate setback seems only temporary and gold traders are feeling pretty confident that at the end of the week, massive fiscal and monetary stimulus should help calm markets. If market volatility stabilizes somewhat, gold will resume its safe-haven status,’ said OANDA’s Edward Moya.