Price of Gold Fundamental Daily Forecast – US Producer Inflation Report to Set Today’s Tone

Gold futures prices continue to slide on Tuesday shortly before the regular session opening. The second day of selling pressure is being fueled by a steady-to-better U.S. Dollar Index, but mostly by a jump in U.S. Treasury yields and increased demand for higher risk assets. Later in the session, traders will get the opportunity to react to the latest data on U.S. Producer Inflation. The outcome of this report could determine the timing of the next Federal Reserve interest rate cut.

At 11:44 GMT, August Comex gold futures are trading $1325.40, down $3.90 or -0.29%.

Traders have to remember that gold is an investment and investors would like to own it at a favorable price. Think of this scenario. Remember in early May, the market hit its low for the year. It wasn’t until late May that the market made its double-bottom on the charts before blasting off to the upside. Were safe-haven buyers or hedgers betting on a stock market sell-off responsible for the entire rally? I doubt it.

I think we saw a lot of short-covering during that 12 day rally because it’s highly improbable to expect a market to go from its low of the year to its highest level in nearly four months in less-than 14 calendar days on speculative buying alone. I also don’t think real buyers or professional investors chased this market higher either.

That being said, the current break is necessary to bring the market back into a value area. This zone is $1313.70 to $1304.40. A test of this area should attract new buyers. That’s where I think the market is headed on this break. So be prepared.

If the Treasury traders got it right then the Fed should lower interest rates in June or July. This could be the start of two or perhaps three rate cuts this year. Rate cuts tend to be bullish for gold. So if you are a gold investor then wait for the pullback into the value area at $1313.70 to $1304.40.

Daily Forecast

Core PPI is expected to come in at 0.2%, up from the previously reported 0.1%. PPI is expected to come in at 0.1%, down from 0.2%. Lower-than-expected readings will indicate a weakening economy. This could be bullish for gold prices because it will increase the chances of a sooner than expected Fed rate hike.