Price of Gold Fundamental Daily Forecast – Underpinned by Lower Demand for Risk, Capped by Strong U.S. Dollar

Gold did turn its daily trend to up late last week and continued the move earlier in the week, but prices are now trading below those break out areas. This indicates that the rallies were fueled by short-covering and buy stops rather than aggressive speculative buying.
James Hyerczyk
Comex Gold

Gold prices are trading flat on Friday after failing to follow-through to the downside following the previous session’s steep decline. Today’s mixed performance is being fed by falling Treasury yields, a stronger U.S. Dollar and weak demand for risky assets. Basically, increased demand for safe-haven Treasurys and U.S. Dollar are offsetting renewed concerns over U.S.-China trade relations. This is created an inside trading range, which often suggests investor indecision and impending volatility.

At 11:27 GMT, June Comex gold is trading $1286.10, down $0.10 or -0.01%.

If you study the price action this week, you’ll see that gold hasn’t acted like a “so-called” safe-haven assets. Nor have traded responded to geopolitical headlines. Buying gold in reaction to these types of headlines has proved to be fruitless.

Gold doesn’t seem to be wearing the hat of safe-haven asset at this time. Its price action seems to be driven more by three factors, the direction of U.S. Treasury yields, the U.S. Dollar and stock prices. Traders should continue to monitor these three factors and stay away from trading the headlines. Saying that gold is a safe-haven during times of geopolitical turmoil is old school thinking. Gold is an investment and professionals only buy investments when they see value.

Given this week’s economic data, the U.S. economy is relatively strong so money will flow into the greenback when investors need a place to park funds during times of financial market volatility. Although Treasury yields are under pressure, U.S. interest rates are relatively high when compared to what the other major countries are offering so professional are more willing to chase the yield in Treasurys when they are looking to park funds.

Finally, there seems to be some correlation between falling equity prices and rising gold prices, but only on days of extreme volatility and when professional money managers feel the need to spread their hedges across several asset classes.

Daily Forecast

Gold did turn its daily trend to up late last week and continued the move earlier in the week, but prices are now trading below those break out areas. This indicates that the rallies were fueled by short-covering and buy stops rather than aggressive speculative buying.

Gold is currently testing a short-term value area at $1285.80 to $1281.40. If the uptrend is legitimate, then buyers could come in on a test of this area. But in order to generate a bona fide breakout to the upside, big volume is going to have to come in on the buy side. Furthermore, it would help if the U.S. Dollar weakened along with stocks in order to attract foreign buyers.

The best advice I can offer is to avoid trading the headlines, and instead focus on the direction of yields, the dollar and stocks.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US