Price of Gold Fundamental Daily Forecast – Weaker Greenback Will Increase Demand for Dollar-Denominated Gold

Gold futures jumped to their highest level since November 7 early Monday as buyers responded to the news of a momentary truce between the United States and China over trade issues. Traders are also continuing to react to last week’s dovish comments from U.S. Federal Reserve Chair Jerome Powell.

A weaker U.S. Dollar is primarily responsible for the price surge. The dollar is weakening because of position-squaring by investors who bought the greenback ahead of US-China meeting as a hedge against an unfavorable outcome. This news is driving up foreign demand for dollar-denominated gold futures.

At 0929 GMT, February Comex Gold is trading $1235.60, up $9.60 or +0.79%.

Helping to put a lid on the market is a jump in U.S. Treasury yields and increased appetite for risky assets. The trade dispute truce news is helping to drive U.S. stock index futures higher, leading to the call for a 500 point gain on the opening of the Dow Jones Industrial Average.

U.S.-China Truce

U.S. President Donald Trump and Chinese President Xi Jinping found some common ground at their crucial meeting this week-end at the G20 summit in Argentina, agreeing to put their bilateral trade dispute on pause momentarily. According to reports, they struck a deal to hold off on placing additional tariffs on each other’s goods after January 1, while agreeing to continue talks for a permanent end to the major issues.

The Whitehouse reported that Trump and Xi discussed a range of issues including the trade dispute that has left over $200 billion worth of goods hanging in the balance.

“President Trump has agreed that on January 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10 percent rate, and not raise it to 25 percent at this time,” the statement read.

“Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent,” the statement added.

In the meantime, “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately,” the White House said.

Powell’s Dovish Comments Still Supportive

Gold could pick up additional strength in response to last week’s comments by Federal Reserve Chairman Jerome Powell in which he hinted at a slower pace of rate hikes.

Forecast

Gold is likely to be underpinned today by the weaker U.S. Dollar, however, gains could be capped by rising Treasury yields and a sharp rise in U.S. equity markets.

U.S. traders will have a mountain of economic reports to assess on Monday including speeches from four FOMC members.

The major report is ISM Manufacturing PMI. It is expected to come in at 57.5, slightly below the previously reported 57.7.

Minor reports include Final Manufacturing PMI, Construction Spending, ISM Manufacturing Prices and Total Vehicle Sales.

Fed Chair Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee, but the hearing is expected to be postponed to Thursday because the major U.S. exchanges will be closed on Wednesday in honor of former U.S. President George H.W. Bush, who died on Saturday at the age of 94.