Gold futures are trading lower on Thursday after failing to follow-through to the upside following yesterday’s strong surge. The early pressure is being provided by firm Treasury yields, a slightly stronger U.S. Dollar and some appetite for risk. There are no major reports today so gold is likely to continue to be guided by these three factors throughout the session.
At 10:25 GMT, June Comex gold is trading $1307.90, down $6.00 or -0.46%.
Gold is being primarily underpinned by the dovish tone of the U.S. Federal Reserve and European Central Bank from Wednesday. The Fed’s minutes solidified the central bank’s dovish policy stance amid risks of global economic slowdown. The ECB maintained its dovish policy as expected while reiterating its concerns over the downside risks to the Euro Zone economy.
Gold traders were also keeping an eye on yields in both the U.S. and the Euro Zone. In the U.S., yields fell on Wednesday after a neutral U.S. consumer inflation report reinforced the Fed’s decision to pause rate hikes. Meanwhile, yields also fell in Europe after ECB President Mario Draghi raised the prospect of more support for the struggling Euro Zone economy on Wednesday if its slowdown persisted.
Besides the mixed fundamentals gold prices are also being influenced by the chart pattern. The trend is down. The market is also testing a short-term resistance area a $1307.90 to $1313.30. Trader reaction to this zone should determine the direction of the market today, but the trend won’t change to up unless the buying is strong enough to take out $1330.80.
Based on the price action this week, it looks as if buyers are being influenced by reports calling for a weakening global economy. First, it was the International Monetary Fund’s downgrade of global growth. Second, it was yesterday’s dovish tone from the Fed and the ECB.
Gold prices are likely to be underpinned if this theme continues.