Price of Gold Fundamental Daily Forecast – Traders Watching How Dollar Responds to China’s Tariffs Against US

Gold prices turned around and could move higher following the announcement of China’s tariffs on U.S. goods. This move makes sense because not only did Treasury yields fall further along with the stock market, but the U.S. Dollar weakened. Like I said before, gold is not a favorite safe-haven asset, but foreign demand for it will increase if the U.S. Dollar weakens.
James Hyerczyk
Comex Gold

Gold prices moved higher on Monday after struggling earlier in the session despite a drop in U.S. Treasury yields and renewed shedding of higher risk assets. Traders attributed the early weakness to U.S.-China trade tensions which are pressuring the Chinese Yuan, making gold bullion expensive for buyers in the world’s largest consumer – China.

Some analysts are calling gold a “safe-haven” asset but this hasn’t been the case lately. The safe-havens at this time are the U.S. Dollar, the Japanese Yen, the Swiss Franc and U.S. Treasurys. So don’t expect a miraculous rally in gold unless for some reason the dollar weakens along with U.S. Treasury yields and the stock market. Early indications are that the “miraculous event” may be the announcement new tariffs against the U.S. from China.

At 12:40 GMT, June Comex gold is trading $1290.50, up $3.10 or +0.26%.

Geopolitical Events

The main event that traders are watching is the breakdown in negotiations between the United States and China and the possible escalation of the more-than-yearlong trade dispute between the economic powerhouses.

Just a short while ago, China announced it is raising tariffs on $60 billion of U.S. goods to 25% starting on June 1. This is in retaliation to President Trump’s decision to boost levies on $200 billion worth of China-made goods to 25% as of last Friday.

In the Middle East, Saudi Arabia said on Monday that two Saudi oil tankers were among vessels targeted by a “sabotage attack” of the coast of the United Arab Emirates, condemning it as an attempt to undermine the security of global crude supplies.

According to CNBC, the UAE said on Sunday that four commercial vessels were attacked near Fujairah, one of the world’s largest bunkering hubs. The port lies near the Strait of Hormuz, one of the world’s most important oil export waterways.

It also said that Iran’s foreign ministry called the incidents “worrisome and dreadful” and asked for an investigation into the matter.

Daily Forecast

Gold prices turned around and could move higher following the announcement of China’s tariffs on U.S. goods. This move makes sense because not only did Treasury yields fall further along with the stock market, but the U.S. Dollar weakened. Like I said before, gold is not a favorite safe-haven asset, but foreign demand for it will increase if the U.S. Dollar weakens.

The dollar may have weakened because investors may have begun pricing in a possible U.S. recession. If this were to occur then the Fed would be forced to cut interest rates. If rates are cut then the dollar will become a less-desirable asset. A weaker dollar will lead to increased demand for dollar-denominated gold and prices will go up. That’s all you need to know, don’t focus on “geopolitical events”, watch how they affect the U.S. Dollar.

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