Price of Gold Fundamental Daily Forecast – Weak Demand for Risk Providing Some Support Ahead of Powell Speech

Gold futures are trading slightly better on Monday, while recovering some of Friday’s loss that was fueled by trader reaction to a stronger-than-expected U.S. Non-Farm Payrolls report. The market is trading inside the previous session’s range, which tends to indicate investor indecision and impending volatility.

The price action and the relatively low volume and volatility also suggest that the major players may still be on the sidelines after a long U.S. holiday weekend. They may have decided to wait for Tuesday’s speech from Federal Reserve Chairman Jerome Powell before taking a position.

At 12:30 GMT, August Comex gold futures are trading $1408.00, up $7.90 or +0.57%.

Monday’s price action is largely being influenced by the direction of U.S. Treasury yields, the U.S. Dollar and demand for higher risk assets. This theme is likely to continue throughout the session.

Supporting gold prices are the drop in Treasury yields. This price action suggests sellers may have overreacted to Friday’s jobs report. On Friday, the yield on the benchmark 10-year U.S. Treasury yield surged past 2% as investors reduced their bets on a Fed rate cut at the end of the month.

Lower yields are keeping a lid on the U.S. Dollar, which may have overextended itself on Friday in reaction to the rise in yields and jump in non-farm payrolls. However, the dollar is also being underpinned by a slightly weaker Euro.

Weakness in the U.S. equity markets is also being scene as supportive for gold prices as stock market investors trim long positions due to emerging concerns over the direction of U.S. interest rates and the lack of progress in U.S.-China trade relations.

We may not see much price action today due to the absence of a few of the major players ahead of Powell’s speech, but there does seem to be a developing bias to the upside. This could continue throughout the session if stock prices continue to weaken. However, the main influence on prices will be Treasury yields and the U.S. Dollar.