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Price of Gold Fundamental Daily Forecast – Tariff Confusion, Fed Uncertainty Underpinning Gold

James Hyerczyk

Gold futures are edging higher on Tuesday, boosted by lower demand for risky assets. Treasury yields are also trading lower which is pushing down the U.S. Dollar, driving up demand for dollar-denominated gold. Worries over the looming U.S. tariffs on Chinese goods that are supposed to kick in on December 15 is one catalyst underpinning gold. The other is some light position-squaring ahead of the start of the Federal Reserve’s two-day policy meeting later today.

At 12:19 GMT, February Comex gold is trading $1472.20, up $7.30 or +0.50%.

Global Equity Markets Turn Sharply Lower

Gold was flat-lining earlier in the session before posting its turnaround as global equity markets turned sharply lower. As stocks plunged, investors bought Treasurys for protection, driving down interest rates. This move drove the U.S. Dollar lower, while fueling increased demand from foreign buyers.

Treasury Yields Move Lower as Investors Look Ahead to Fed Meeting

U.S. government debt prices were higher Tuesday morning, helped by safe-haven buying and position-squaring ahead of a meeting by the U.S. Federal Reserve.

Later today, the Fed will start a two-day meeting with policymakers expected to keep interest rates unchanged.

Trade Talk Update

China is buying more U.S. soybeans, as both countries try to reach an initial agreement on trade. The move may be seen as an olive branch designed to get the U.S. to rollback its tariffs.

However, according to a report from the South China Morning Post, China and the U.S. are unlikely to reach a trade deal this week.

The report said chances of a deal on that front are falling as the U.S. focuses on finalizing a trade deal with Mexico and Canada. Sources told CNBC on Monday that House Democrats and the Trump administration are close to a tentative deal that would replace North American Free Trade Agreement.

The Morning Post added that additional tariffs on Chinese goods are not expected to take effect. The U.S. had set December 15 as a deadline for both sides to reach a so-called phase one trade deal. If a deal was not reached by then, the U.S. would implement more tariffs targeting China.

Daily Forecast

Are the tariffs on or off? That is the question. Without an official announcement, investors may still feel the need to move money into the safe-haven Treasurys and Japanese Yen. Additionally, traders are selling U.S. Dollars due to the uncertainty and moving money into gold.

Gold traders are also worried about the Fed. Gold prices could drop sharply on Wednesday if the Fed is more hawkish than expected.

This article was originally posted on FX Empire

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