Price of Gold Fundamental Daily Forecast – Thin Holiday Volume Breathes Life into Bear Market

Gold prices are up on Wednesday, fueled by a weaker U.S. Dollar and the relatively thin volume due to the U.S. bank holiday. Essentially, there is no stopper in the market with most of the major players from the U.S. taking the day off. This short-term counter-trend rally could continue all week if the major traders decide to create an extended weekend.

The weakness in the U.S. Dollar is being fueled by a stronger Japanese Yen. Despite looming U.S. tariffs on Chinese imports, an easing of anxieties over the trade dispute may have given Dollar/Yen buyers an excuse to book profits. A weaker U.S. Dollar tends to increase foreign demand for dollar-denominated assets like gold.

Traders appeared to calm down late Tuesday after China’s central bank made a move on the yuan after China’s currency dropped through the psychologically significant 6.7 to dollar mark, hitting its lowest in almost a year as anxieties over U.S. trade frictions deepened. This news drove the dollar lower against a basket of major currencies, giving gold short-sellers an excuse to book profits and aggressively cover positions.

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A short-term counter-trend rally is acceptable at this time to alleviate some of the downside pressures. The first target zone at $1256.60 to $1260.80 is currently being tested. If the buying is strong enough to overcome $1274.40 with conviction then I think the short-sellers will start to get a little nervous and may even revert to panic buying to protect their profits.

Value buyers may also be exerting some upside pressure. They may have stepped in on Tuesday as the market neared the bottom hit on July 7, 2017, at $1230.70.

So over the short-term, we could see some short-covering due to oversold technical conditions and relatively thin volume. I wouldn’t give up on the short side of the market so easily, however. After the U.S. holiday, traders will get the opportunity to react to the minutes from the Federal Reserve’s June meeting on Thursday and Friday’s U.S. Non-Farm Payrolls report on Friday.

Investors will be looking for validation of policymakers’ forecasts for two more rate hikes this year. If the data supports the Fed’s assessment then look for gold sellers to return to the market with a vengeance.