Price of Gold Fundamental Daily Forecast – Traders Monitoring Potential Currency Crisis in Turkey

Gold futures are slightly lower shortly before the regular session opening on Monday. Earlier in the session, a stronger U.S. Dollar drove gold prices sharply lower. Since then, gold has clawed back more than half of its earlier losses while the U.S. Dollar has pulled back to its low of the session. A drop in U.S. Treasury yields is also helping to underpin gold prices.

At 11:31 GMT, June Comex gold is trading $1739.00, down $4.90 or -0.28%. This is up from a low of $1728.60.

Gold fell more than 1% shortly after the opening on Monday as investors chose the safety of the U.S. Dollar and government bonds, spooked by Turkey’s abrupt decision to replace its central bank head with a critic of high interest rates. Conditions have softened, however, leading investors to exit their safe-haven dollar positions, helping gold prices to recover.

Turkish Lira Crumbles on Central Bank Woes

The Turkish Lira slumped toward a record low versus the dollar after President Tayyip Erdogan stunned investors over the weekend by replacing the hawkish central bank governor with a critic of high interest rates.

Worries that events in Turkey will cause disruptions in other financial markets also supported the dollar because of its status as a safe-harbor currency.

Erdogan fired the central bank governor only two days after a sharp rate hike that was meant to head off inflation of nearly 16% and support the Lira.

The new central bank governor likely means a reversal of the hawkish and orthodox steps taken to battle inflation, which could lead to prolonged market volatility, analysts said. But so far, we haven’t seen it, helping gold to recover from earlier losses as the dollar retreats from its high.

Treasurys Gain on Turkey Tumult, Pushing 10-year Yield Down from Recent High

U.S. government debt prices were higher on Monday morning, as a dramatic downturn in the Turkish Lira sparked fears of a new currency crisis.

At around 11:20 GMT, the yield on the benchmark 10-year Treasury note was lower at 1.677%, while the yield on the 30-year Treasury bond slipped to 2.3881%.

Daily Forecast

Gold traders will continue to eye the situation in Turkish, but so far we haven’t seen the volatility in the financial markets that some analysts had forecast. The first sign of renewed turmoil should send yields lower, which could help underpin gold. However, if it also happens to send the U.S. Dollar higher, then look for gold prices to retreat again. Needless to say, the gold market could be subject to some heightened volatility.

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