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Price of Gold Fundamental Daily Forecast – Mild Short-Covering Due to Uncertainty Over Trade Deal

James Hyerczyk

Gold futures are edging higher on Wednesday in a mild attempt to recover from yesterday’s steep sell-off that was fueled by a combination of stronger-than-expected U.S. economic data and the realization by some weaker longs that central banks weren’t going to be aggressively cutting rates as previously expected. A temporary pause in the stock market rally, a dip in Treasury yields and general uncertainty over the progress of U.S.-China trade talks are also underpinning prices today.

At 12:54 GMT, December Comex gold is trading $1486.50, up $2.80 or +0.18%.

Strong Greenback Makes Dollar-Denominated Gold Less-Desirable

On Tuesday, the U.S. Dollar soared against a basket of currencies on rising hopes for a U.S.-China trade deal and a string of solid U.S. economic data. The strong greenback drove down demand for dollar-denominated gold.

Hopes that the Trump administration could roll back some of the tariffs it imposed on goods from China as part of a “phase one” U.S.-China trade deal boosted risk sentiment in financial markets.

On the economic front, a survey on the vast U.S. service sector published on Tuesday showed that business sentiment had improved in October from a three-year low in September. The ISM non-manufacturing sector rose to 54.8 from 52.6 in September, beating market expectations.

This news followed Friday’s stronger-than-expected U.S. Non-Farm Payrolls report. The headline number rose by 128,000 in October, exceeding the estimate of 75,000 from economists surveyed by Dow Jones.

Central Banks Not Expected to Continue Cutting Rates

Recent statements from the European Central Bank, U.S. Federal Reserve, Bank of Japan, and the Reserve Bank of Australia indicate that the string of recent interest rate cuts may be coming to an end, and that central bankers may be looking at other ways to stimulate their economies if need be.

This news is making gold investors nervous because most of the late summer/early fall rally was generated by the notion that rates would remain under pressure.

Daily Forecast

There are no major economic reports on Wednesday with most gold traders likely to remain focused on the direction of U.S. Treasury yields, the U.S. Dollar and risk sentiment.

Furthermore, traders seem a little tentative in the financial markets today. The trade deal is still an uncertainty with little revealed about its progress since late last Friday. Some traders are saying that due to the history of stops and starts by the U.S. and China, a deal will not be in the bag until the agreement is actually signed.

This article was originally posted on FX Empire