Price of Gold Fundamental Daily Forecast – Underpinned as Pandemic’s Second Wave Intensifies

Gold futures are inching higher on Thursday on relatively low volume with the move being supported by a slightly weaker U.S. Dollar and lower U.S. Treasury yields. The two factors actually move hand-in-hand.

Investors are tempering bullish expectations about a COVID-19 vaccine that is unlikely to avert a grim winter in Europe and the United States as the pandemic’s second wave intensifies, according to Reuters.

At 09:53 GMT, December Comex gold futures are trading $1869.70, up $8.10 or +0.44%.

Surging infections and new social restrictions in Europe has Germany’s economic advisers cutting next year’s growth outlook, while in the United States, New York has ordered bars and restaurants to close early as cases hit record levels.

We’re also starting to see sellers return to the U.S. Dollar while the reflationary momentum in the stock market and FOREX seems to be fading, fueling some light gold buying.

German Economic Advisers Cut Growth Outlook for 2021

The German government’s council of economic advisers expects Europe’s largest economy to shrink less than initially feared this year thanks to a strong summer, but a second wave of the COVID-19 pandemic is clouding the growth outlook for next year.

“We’ve not yet overcome the coronavirus crisis,” council head Lars Feld said, adding that the economic recovery remained fragile due to the rapid rise in new coronavirus infections.

“Further developments depend on how the pandemic can be contained and how other economies abroad fare,” Feld said in reference to Germany’s relatively large reliance on exports.

This will support gold prices because it likely means the European Central Bank will have to provide more stimulus. The ECB is widely expected to unveil a new stimulus package next month to help the pandemic-hit Euro Zone economy.

ECB President Christine Lagarde also poured cold water on rising investor optimism about a new vaccine after U.S. drugmaker Pfizer Inc said on Monday its experimental COVID-19 vaccine was more than 90% effective based on initial trial results.

“While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved,” she added.

This is another bullish factor for gold.

Daily Forecast

Gold futures may be rangebound, but at least they are not going down as sharply as they did on Monday. As more and more companies come forward with the promise of vaccines to stop the pandemic, gains may be limited, but I expect the market to be supported because the Fed and other central banks are likely to stay in an accommodative mode for a long period of time.

What gold actually needs right now is the promise of more fiscal stimulus from the government. Without it, it’s going to have a hard time breaking out to the upside. Therefore, we expect more sideways-to-lower trading.

For a look at all of today’s economic events, check out our economic calendar.