Price of Gold Fundamental Daily Forecast – Weakening Equity Markets Could Spike Prices Higher

Gold prices are trading higher shortly after the regular session opening despite another surge in the U.S. Dollar Index. A decline in U.S. Treasury yields this week and lower demand for risky assets today is helping to underpin gold prices.

This week’s divergence between the gold and the U.S. Dollar Index this week indicates that buyers are using gold as a safe-haven asset. Furthermore, recent selling pressure on gold may have been exaggerated, making the asset relatively cheap. Increased tensions over U.S.-Iran relations may also be underpinning prices.

At 13:28 GMT, June Comex gold is trading $1281.10, up $1.70 or +0.12%.

Technical Factors Contributing to Strength

Gold found support on Tuesday after trading as low as $1267.90. This low fell inside a major technical support area defined as $1272.70 to $1253.00. The market is also trading higher for the week, which suggests strong technically-based buying.

Technically oversold conditions may have also provided support. Recent data from the U.S. Commodity Futures Trading Commission, showed speculators had switched to a net short position in COMEX gold in the week to April 16. This came as a surprise to many gold investors who viewed this news as a buying opportunity.

Global Economic Data Underpinning Prices

Traders are also saying that weakness in the global equity markets is helping to increase gold’s appeal as a safe-haven asset. A decline in German and South stock markets was fueled by weaker-than-expected economic data, which renewed concerns over a global economic slowdown, driving investors into the safety of the gold market.

U.S. Economic Data Mixed

Earlier today, headline U.S. Core Durable Goods Orders and Durable Goods Orders came in better-than-expected, but last month’s data was revised both higher and lower. Weekly Unemployment Claims surprisingly jumped to 230K, higher than the 199K forecast.

Daily Forecast

Demand for gold could pick up throughout the session if U.S. stock indexes continue to weaken. Shortly after the U.S. opening, the Dow is down over 200 points as shares of 3M dropped 10% after the company reported earnings that were much lower than analysts had expected.

The S&P 500 Index and NASDAQ Composite were steady to better, but if they turn lower along with the Dow, this could spike gold prices to the upside.