Price of Gold Fundamental Daily Forecast – Traders Preparing for Headline Driven Breakout

Gold futures are trading nearly flat for a third session on Wednesday with the market likely being capped by a stronger U.S. Dollar, while being underpinned by weaker demand for risky assets. U.S. Treasury yields are slightly lower and the Japanese Yen is a little higher. This suggests that light “safe-haven” buying may be offering some support for gold.

At 11:40 GMT, February Comex gold is trading $1481.20, up $0.20 or +0.03%.

Traders are saying the catalysts behind the price behavior are mixed messages on the U.S.-China trade deal, which offset strong economic data out of the United States. Comments from Federal Reserve officials may also be influencing the price action. Gold traders are also monitoring the events surrounding the new developments over Brexit.

Trade Deal Update

U.S. Trade Representative Robert Lighthizer on Tuesday said details of Chinese purchases across U.S. agriculture, manufacturing, energy and service sectors in the “Phase One” deal would be detailed in writing, but gave no further details about when the written agreement would be released.

It’s also being reported that Washington is set to implement five rules to limit exports of sophisticated technology to adversaries like China.

U.S. Economic Data

On Tuesday, the U.S. reported housing number rose higher than expected and permits for future home construction soared to a 12-1/2-year high. Building Permits came in at 1.48M versus a 1.41M estimate. Housing Starts came in at 1.37M versus a 1.34M forecast.

Industrial Production rose 1.1%. Analysts were looking for a reading of 0.8%. Capacity Utilization Rate came in at 77.3%, matching the forecast.

FOMC Member Rosengren Speaks

Fears of a looming recession in the U.S. are overblown, and underlying forces point to a strong consumer and continued growth in the coming year, Boston Fed President Erin Rosengren said on Tuesday.

“My own view is that it is unlikely we will have an economic downturn in the coming year, given the generally positive financial conditions and the continued accommodative monetary and fiscal policies,” Rosengren said, in a luncheon speech to the Forecasters Club of New York.

Rosengren also said the Federal Reserve is unlikely to need to cut interest rates further in the near term barring a “material change” in the outlook for the U.S. economy.

Rosengren’s outlook for where interest rates are headed largely mirrored one from Dallas Fed President Robert Kaplan delivered earlier on Tuesday. Both say the appropriate course for the Fed right now is to stay put after lowering borrowing costs three times since July.

Daily Forecast

The chart pattern suggests a slight upward bias, however, more importantly, it also indicates impending volatility. We’re looking for a news driven breakout over the near-term and a jump in trading volume.

For example, news that drives the U.S. Dollar sharply lower is likely to give gold prices a boost. The same goes for headlines that drive U.S. stock indexes sharply lower.

Essentially, a “risk-on” scenario is likely to keep downside pressure on gold. A “risk-off” scenario is likely to continue to underpin gold prices.