Price of Gold Fundamental Daily Forecast – Pressured by Rising Yields, Firmer Dollar but Underpinned by Stock Market Weakness

Gold futures are trading nearly flat early Wednesday after plunging to its lowest level since February 9 the previous session. The catalyst behind the selling pressure was a spike in the U.S. Dollar, driven higher by hawkish commentary from Federal Reserve Chairman Jerome Powell.

In his first testimony before Congress on Tuesday, Powell vowed to prevent the economy from overheating while adhering to a strategy to gradually raise interest rates.

At 0851 GMT, April Comex Gold futures are trading $1318.30, down $0.30 or -0.02%.

Powell’s upbeat views on the economy bolstered bets on further Fed interest rate hikes this year.

Forecast

While gold is hovering near its low for the month, it remains in a position to challenge its February 8 bottom at $1309.00, but more importantly a major technical retracement zone at $1306.60 to $1291.50.

The U.S. Dollar is sitting near a two-week high early Wednesday which is helping to keep a lid on gold prices, however, hedge-buying due to a sell-off in U.S. and Asian stock markets is helping to drive up safe-haven demand for gold.

The dollar and the direction of stock index futures will be at the forefront today since they are currently having the most impact on gold prices.

The dollar is likely to be driven by a slew of economic data including Preliminary GDP, Chicago PMI and Pending Home Sales.

Preliminary GDP is expected to rise 2.5%, down from the previous 2.6%. Chicago PMI is forecast at 64.2, down from 65.7 and Pending Home Sales are estimated to have risen by 0.4%, down from 0.5%.

Strong economic data could drive up U.S. Treasury yields which would help underpin the U.S. Dollar while putting pressure on demand for dollar-denominated gold.

Rising yields are what’s driving stock prices lower. A normal sell-off should have little effect on gold prices, but a steep plunge could lead investors to seek shelter in gold.

Gold prices should weaken if interest rates and the U.S. Dollar continue to rise. However, these losses could be limited if stocks sell-off sharply.