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Price of Gold Fundamental Daily Forecast – Gold Jumps to Multi-Month High, but Gains Limited by Stronger U.S. Dollar

James Hyerczyk
The real reason for the surge in gold prices are concerns over a weakening global economy following a report of lower Chinese industrial output growth to a more than 17-year low of 5% in May, and lower than expected retail sales data in the United States.

Gold soared on Friday to its highest level since May 2018 after economic releases raised concerns over a slowing global economy. Gold is up about one-percent this week and is on pace to close higher for a fourth consecutive week. After hitting the multi-year high, prices retreated, however, as the U.S. Dollar strengthened against a basket of major currencies.

At 12:51 GMT, August Comex gold futures are trading $1354.70, up $11.00 or +0.81%.

Some traders are trying to say the buying is also being fueled by the renewed tensions in the Middle East after yesterday’s tanker attacks. However, we didn’t see that on Thursday when the attacks took place. Furthermore, since experts are saying a military response from the U.S. on Iran is fairly remote, there is some doubt that a geopolitical risk premium has been placed.

Others are saying that the political unrest in Hong Kong is also behind the strength in gold. There may be some concerns over Hong Kong’s reputation as a major international investing hub, but the story is not likely important enough to attract speculative buyers in gold.

Gold is traded in Hong Kong, but if there are any problems with trading, the business would likely shift to other major gold exchanges in London and New York.

The real reason for the surge in gold prices are concerns over a weakening global economy following a report of lower Chinese industrial output growth to a more than 17-year low of 5% in May, and lower than expected retail sales data in the United States. Both reports point toward more stimulus from the People’s Bank of China and the U.S. Federal Reserve, and more stimulus and lower interest rates tend to be supportive for gold prices.

Before just jumping in on the long side with both hands, traders should be aware of the strengthening U.S. Dollar index because a stronger greenback tends to limit foreign demand for the dollar-denominated asset.

This article was originally posted on FX Empire

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