Price of Gold Fundamental Daily Forecast – Weak Currencies Catalyst Behind Lower Gold Prices

Falling currency prices, rising Treasury yields and strong appetite for risk are likely to keep the downside pressure on gold prices. The weak outlook for the global economy is generating the pressure on the currencies, while optimism over the start of trade talks between the United States and China is helping to increase demand for higher-yielding assets.
James Hyerczyk
Gold Bars and Dollar

Gold is trading lower on Monday, pressured by a number of factors. The stronger U.S. Dollar is weighing the most on dollar-denominated gold because of reduced foreign demand. The dollar is being driven higher by rising U.S. Treasury yields that are making it a more attractive investment. Increased demand for higher risk assets is also pressuring investor demand for gold.

At 10:19 GMT, April Comex gold futures are trading $1310.30, down $8.30 or -0.63%.

The U.S. Dollar is up against most major currencies on Monday, hovering around a six-week high amid new worries about U.S.-China trade relations and global growth. Helping to boost the dollar are a weaker Euro, Australian Dollar and New Zealand Dollar.

The Euro has been weakening since last Monday after the European Commission lower its outlook for the Euro Zone economy. The Aussie has been under pressure since the Reserve Bank of Australian shifted monetary policy to neutral, suggesting to some that it was preparing for an interest rate cut later in the year. This week, the Reserve Bank of New Zealand is expected to leave its benchmark interest rate unchanged while issuing a dovish monetary policy statement that hints at a rate hike.

The strength in the U.S. Dollar is catching many gold traders by surprise because January ended with investors bullish gold and bearish the dollar due to the recent dovish tone by the U.S. Federal Reserve. At its end of its January policy meeting, the Federal Open Market Committee voted to leave its benchmark interest rate unchanged while saying it would be “patient” with in deciding future rate hikes. This caused investors to price in the possibility the central bank would take a pause in its rate hikes. This news also drove gold to a multi-month high.

Since February 1, gold has been pressured at times by rising Treasury, increased demand for risk and bearish currencies due to lowered economic expectations by the major central banks.

Daily Forecast

Falling currency prices, rising Treasury yields and strong appetite for risk are likely to keep the downside pressure on gold prices. The weak outlook for the global economy is generating the pressure on the currencies, while optimism over the start of trade talks between the United States and China is helping to increase demand for higher-yielding assets.

The return of China to the markets after the week-long Lunar New Year is also adding to the volatility in the gold market.

If the downside momentum continues then look for gold to test a key technical area at $1306.30 to $1300.40.

Please let us know what you think in the comments below. 

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