Price of Gold Fundamental Daily Forecast – Trend Up, but Set-up for Short-Term Correction

Gold futures are posting a volatile two-sided session early Monday as investors continue to react to the price action in the U.S. Dollar and equity markets. The price action is primarily being drive by appetite for risk. The catalyst behind the two-sided trade is concern over retaliation by China to Trump’s memorandum calling for $60 billion in sanctions against China.

At 0755 GMT, June Comex Gold futures are trading $1351.70, down $4.00 or -0.30%. Prices rose to $1356.80, barely taking out last week’s high before sellers came in to stop the rally.

In other news, gold speculators cut their net long position by 23,822 contracts to 121,838 contracts, U.S. Commodity Futures Trading Commission data showed.

Additionally, last week’s rally discouraged Asian investors from purchasing gold at a 5-week high. This even as discounts in India widened to their highest in 6 ½ months.

Finally, Democratic Republic of Congo’s mines minister rejected a proposal by mining companies on Friday to soften some provisions in a new mining code in exchange for higher royalties.

Forecast

The early price action strongly suggests the direction of the gold market today will be determined by the movement in the U.S. Dollar and U.S. equity markets.

The U.S. Dollar is trading lower after taking out a key bottom at 88.915 from March 7. Gold prices could be underpinned if this bottom is taken out with conviction. However, gains could be limited if the major stock indexes start to recover some of last week’s losses.

U.S. equity indexes are trading higher shortly before the cash market opening after shares in Asia and Europe recovered from their earlier losses. The recovery was fueled by the news that the U.S. agreed to exempt South Korea from steel tariffs.

Basically, the market is set-up for elevated levels of volatility. Near-term resistance is being fueled by the easing of tariffs against South Korea, however, the market could still rally amid fears that rising tensions between the U.S. and China could lead to a full-blown trade war.

On Saturday, some of the world’s top economists and business leaders at the China Development Forum in Beijing warned about the risks of a trade war between the two economic powerhouses.

Although there is room to the downside after last week’s rally from $1312.40, the trend is up and likely to remain up until the fears of a trade war subside.