Price of Gold Fundamental Daily Forecast – Specs Watching North Korea, Traders Watching U.S. Dollar

Gold prices inched higher early in the session to a seven week high before turning lower. The early buying was in reaction to tensions over North Korea and geopolitical events in Venezuela. Traders were also watching U.S. Treasury yields and the U.S. Dollar’s performance against a basket of currencies.

At 0600 GMT, December Comex gold futures were trading $1273.90, down $1.40 or -0.11%. Earlier in the session, the futures contract reached a high of $1277.30.

The early price action indicates traders are being cautious about the situation in North Korea, but not enough to trigger a surge to the upside until the problem escalates.

Speculators may be underpinning the market, waiting for something bullish to develop, but to other investors, it’s been business as usual with normal reactions to firm U.S. Treasury yields and a stronger U.S. Dollar.

Some traders are saying that thin trading conditions in Asia may be behind the early lackluster trade.

In other news, hedge funds and money managers sharply increased their net long position in COMEX gold to a four-week high in the week to July 25, according to the U.S. Commodity Futures Trading Commission (CFTC).

Forecast

For longer-term traders, the key support is $1259.30. Holding above this price will signal that buyers are coming in to support the trend. Now that the market has cleared two tops at $1267.10 and $1269.80, upside momentum could continue to increase with $1305.50 the next likely target.

Short-term traders may get a little nervous if $1269.40 fails then $1259.30. The trend will change to down if $1249.40 fails as support.

The main focus for everyday traders will be the direction of the U.S. Dollar and U.S. Treasury yields. A weaker dollar and lower yields will be supportive. A stronger dollar and higher yields are likely to keep a lid on gold prices.

Traders will also be watching the stock market. Any signs of lower demand for risky assets will be supportive for gold.

Key reports in the U.S. today are Chicago PMI and Pending Home Sales. Chicago PMI is expected to drop to 60.8 from 65.7. Pending Home Sales are expected to rebound to up 0.9% from a 0.8% drop the month before.