Price of Gold Fundamental Daily Forecast – Firmer Dollar, Margin Call Selling Weighing on Prices

Gold prices are trading lower shortly before the regular session opening on Monday. After a steady opening, prices plunged as the U.S. Dollar firmed against a number of currencies especially the higher-risk Australian and New Zealand Dollars. A stronger U.S. Dollar typically weighs on foreign demand for dollar-denominated gold.

At 11:41 GMT, August Comex gold futures are trading $1714.70, down $22.60 or -1.30%.

The dollar is hovering close to more than a one-week high against a basket of major currencies, however, a surge against the Euro will more than likely turn the U.S. Dollar Index higher. This could put further pressure on gold prices.

Another plunge in global equity markets in Asia, Europe and the United States may be pressuring gold. Investors are trimming long positions and moving money in the safe-haven U.S. Dollar. Gold is also being pressured by margin call selling. As stocks weaken, some investors are selling gold to cover margin calls and losses. The move taking place in stocks and gold is very similar to what we saw in March when equities were routed at the initial outbreak of the coronavirus pandemic.

Other News

In other news, speculators cut their bullish positions in COMEX gold and silver contracts in the week to June 9, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Daily Forecast

The catalysts driving the price action on Monday are renewed concerns over demand destruction from COVID.

Concern is growing of a second wave of the pandemic, which has infected more than 7.66 million people worldwide and killed more than 420,000, even in many countries that seemed to have curbed its spread.

Reuters wrote that states in the reopening process including Alabama, California, Florida and North Carolina are reporting a rise in daily new coronavirus cases. Texas and North Carolina reported a record number of virus-related hospitalizations Saturday.

Meanwhile, Governor Andrew Cuomo warned New Yorkers against triggering a second wave of the coronavirus.

A district of Beijing was on a “wartime” footing and the capital banned tourism on Saturday after a cluster of novel coronavirus infections centered around a major wholesale market sparked fears of a new wave of COVID-19, Reuters reported.

Prices could continue to retreat today if equity prices get hit hard. Gains could remain capped until the arrival of more fiscal and monetary stimulus from the U.S. government and Federal Reserve, respectively.

For a look at all of today’s economic events, check out our economic calendar.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.