Price of Gold Fundamental Daily Forecast – Demand for Gold Drops Amid Stronger U.S. Dollar, Appetite for Risk
Gold prices hit a two-week low early Monday as investors continued to react to rising U.S. Treasury yields and increased demand for higher risk assets. The rise in Treasury yields is helping to make the U.S. Dollar a more attractive investment which is weighing on demand for dollar-denominated gold.
At 0612 GMT, December Comex Gold futures are trading $1278.00, down $2.60 or -0.20%.
Besides the impact of higher Treasury yields on the value of the U.S. Dollar, the Greenback is also being supported by a weaker Japanese Yen. The USD/JPY rose to a three-month high after Japan’s ruling bloc scored a big win in Sunday’s election, leaving the door open to ultra-loose monetary policy for longer.
Also supporting demand for the U.S. Dollar is the lack of fresh news out of North Korea. If bad news about the rogue nation is generated then we could see a flight-to-safety rally into gold.
Forecast
There are no major news events in the U.S. today so investors are likely to continue to respond the election in Japan and the easing of tensions in Washington.
Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party-led (LDP) coalition’s victory on Sunday eased fears that the economic steps implemented under his leadership – such as the Bank of Japan’s super easy monetary policy – would be disrupted and halt the yen’s depreciation against the dollar. This news is bullish for the dollar and bearish for gold.
Not only is the divergence between the monetary policies of the U.S. Federal Reserve and the Bank of Japan bearish for gold, but it is increasing appetite for higher risk assets which is also pulling money out of the gold market.
Additionally, now that the budget issues have been resolved, next up is U.S. tax reform. If President Trump continues to gain support for his tax plan then the dollar is likely to continue to rise. Any issues with tax reform this week are likely to cause volatility in the gold market.
Gold traders are also likely to respond to any news regarding Trump’s appointment of a Fed Chair. A hawkish candidate will be bearish for gold. A dovish candidate could slow down the selling pressure and may even cause a short-term turnaround in the market.
Overall, without North Korea making news, the fundamentals are bearish for gold.
This article was originally posted on FX Empire
