Price of Gold Fundamental Daily Forecast – With Fed Members Quiet, Focus Shifts to Geopolitics

Gold futures are trading slightly lower on Monday shortly after the regular session opening on relatively light volume. Underpinning the market is a dip in U.S. Treasury yields. Putting a cap on gains is a higher U.S. Dollar that is pressuring demand for the dollar-denominated asset and an increase in demand for riskier assets.

At 12:51 GMT, August Comex gold is trading $1426.50 down $0.20 or -0.04%.

After last week’s volatile trade, gold prices are essentially trading steady on Monday. Expectations of a 25-basis point rate cut are providing the support. The lowering of the chances of a 50-basis point rate cut is generating some of the downside pressure. As of Monday morning, traders have priced in a 100% chance of a quarter-point rate cut, while the markets have placed the chances of a more aggressive half a percentage point cut at only about 18.5%.

Gold traders are also watching the Euro since the European Central Bank is scheduled to meet this week on July 25. On Friday, investors ramped up bets for an ECB interest rate cut. Money markets are now pricing in a roughly 60% chance of a 10 basis point rate cut, versus a 40% chance early last week.

An ECB rate cut could drive the Euro lower, which would lead to a higher U.S. Dollar. A stronger U.S. Dollar would be bearish for gold prices.

Daily Forecast

There are no U.S. economic reports today and Federal Reserve members are in their quiet period so the price action in gold is likely to be event driven. Gold traders could be particularly sensitive to escalating tensions in the Middle East and the outcome of elections in the UK.

Tensions in the Middle East will only be supportive for gold if the U.S. Dollar weakens. This is important because there are reports indicating that traders are using the dollar as a safe-haven asset.