Price of Gold Fundamental Daily Forecast – Vulnerable to Stock Market Turnaround

Gold futures are trading at a multi-month high on Monday with the buying being driven by the usual suspects – plunging Treasury yields, a weaker U.S. Dollar and a drop in demand for risky assets. The catalyst behind the move in gold is fear that an escalation of trade tensions behind the United States and China will accelerate the global economic slowdown and lead to a potential recession.

At 13:46 GMT, December Comex gold is trading $1477.20, up $19.80 or +1.37%.

Today’s selling pressure is being fed by a steep decline in Asia Pacific currencies after China allowed the Yuan to drop below the psychological 7 per dollar level. Some are saying that this is China’s response to President Trump’s announcement of additional tariffs on China. Other are saying that suggests the move represents China’s commitment to a long, drawn-out trade war. There are also rumors that China will call off further trade talks with the United States, which are supposed to resume in Washington sometime in September.

Yuan Manipulation

Today’s price action is primarily being fueled by the Yuan breaching the 7 per day level for the first time in 10 years. With the move, President Donald Trump accused China of manipulating its currency.

“China dropped the price of their currency to an almost a historic low,” Trump said in a tweet. “It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

Trump is upset because the drop in the yuan will make Chinese products cheaper for foreign buyers.

For its part, the People’s Bank of China denied devaluing the yuan as a counter to U.S. tariffs. In a statement, PBOC Governor Yi Gang said China will “not engage in competitive devaluation, and not use the exchange rate for competitive purposes and not use the exchange rate as a tool to deal with external disturbances such as trade disputes.”

Daily Forecast

Continue to monitor the price action in Treasurys, the Dollar and the stock markets.

There are rumors that the Bank of Japan may be forced to intervene in an effort to weaken the Japanese Yen. This move could drive Treasury yields higher and especially the U.S. Dollar. This could put unexpected pressure on gold prices.

Traders should also watch the price action in the stock indexes because they are all heading into value zones which could bring in buyers. This could also encourage gold investors to book profits.