Price of Gold Fundamental Daily Forecast – Treasury Rate Inversion Puts Gold in Bullish Position

Traders are saying the greenback is under pressure because of the temporary truce in the trade conflict between the United States and China. However, the move is likely being influenced the most by the steep drop in U.S. Treasury yields that fell to three-month lows.
James Hyerczyk
Gold Bars and Dollar

Gold is trading at its highest level since October 26 on Tuesday, led by a plunging U.S. Dollar. The catalyst behind the move is a steep drop in U.S. Treasury yields. This is helping to make the U.S. Dollar a less-attractive investment.

Traders are saying the greenback is under pressure because of the temporary truce in the trade conflict between the United States and China. However, the move is likely being influenced the most by the steep drop in U.S. Treasury yields that fell to three-month lows.

U.S. Treasury yields fell overnight, with short-dated rates higher than longer term rates. Yields on two maturities at the front of the curve rose above longer-dated 5-year notes for the first time in more than a decade. This is known as “inversion”, and the move has investors agitated enough to make gold a more attractive investment.

Essentially, the yield curve has flattened because Federal Reserve rate hikes have been sending short-dated yields higher, while longer-dated Treasury yields have been pressured by tepid inflation and slowing global growth.

The “inversion” is becoming a major concern for gold and U.S. Dollar traders because it is often an indication of a U.S. economic slowdown or a recession.

Traders are saying that with the Fed becoming more cautious and data dependent with rate hikes, the central bank is more likely to reduce the number of future rate hikes as it approaches the end of the rate hiking cycle.

The weekly chart has February Comex gold in a position to breakout to the upside. The trigger point for the expected acceleration to the upside is the last main top at $1252.00. Taking out this level with conviction could fuel a short-term surge into $1285.70 to $1312.30.

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