Price of Gold Fundamental Daily Forecast – Traders Responding to Weaker Dollar, but Watching Venezuelan Turmoil

Gold prices are trading higher early Friday, erasing some of yesterday’s losses, on the back of a weaker U.S. Dollar. However, gains are being limited by higher Treasury yields and firm equity prices.

The dollar is being pressured against a basket of currencies primarily due to the strength in the Euro. It is trading better following yesterday’s European Central Bank decision to leave interest rates unchanged and ECB President Mario Draghi’s dovish remarks about the weakening Euro Zone economy. Although these events are bearish, the Euro is rising because they had already been priced into the market.

At 0937 GMT, April Comex gold is trading $1288.20, up $2.30 or +0.18%.

The greenback is also being driven lower by a surge in the British Pound which hit an 11-week high on Friday after The Sun reported that Northern Ireland’s Democratic Unionist Party has privately decided to offer conditional backing for Prime Minister Theresa May’s Brexit deal next week.

Also on the bullish side, global growth concerns have kept a lid on equity prices this week. This started early in the week when China reported a drop in quarterly GDP and the International Monetary Fund (IMF) lowered its forecasts for this year and next.

Furthermore, in addition to the ECB’s dovish tone, the U.S. Federal Reserve is already on record saying it would be willing to take a pause in rate hikes if the economy continues to sputter. On Wednesday, the Bank of Japan kept its ultra-loose monetary policy unchanged. It also cut its inflation forecasts and warned of growing risks to the economy from trade protectionism and slowing global demand. Additionally, the People’s Bank of China has already come forward with its own plan for stimulus in an attempt to counteract the negative effects of the U.S.-China trade dispute.

Forecast

The wildcard today that could be agitating gold traders is the economic and political turmoil in Venezuela. At this time, most of the potential issues have been underpinning crude oil prices due to concerns over supply disruptions. However, if conditions escalate, gold could become the “go to” market if there is increased demand for safety.

At last report, Venezuela’s government has received strong support from the country’s military and Russia, which warned the United States no to intervene.

According to The New York Times, President Vladimir Putin of Russia telephoned Mr. Maduro and “emphasized that destructive external interference is a gross violation of the fundamental norms of international law,” according to a statement on the Kremlin’s official website.

The early price action suggests gold will continue to respond to the movement in the U.S. Dollar, but traders stand willing to accept gold’s role as a safe-haven asset if the situation in Venezuela escalates enough to involve Russia and the United States.