Gold futures are trading only slightly better early Friday after giving up most of its earlier gains. After reaching its lowest level in more than six months, gold futures rallied earlier today on short-covering. Traders may have been reacting to technically oversold conditions, a weaker U.S. Dollar and relatively thin trading conditions.
At 0813 GMT, August Comex gold is trading $1250.70, down $0.30 or 0.03%.
Gold is going to have a hard time sustaining any counter-trend rally today because of increasing appetite for risk. At this time, U.S. Treasury yields are higher, U.S. stock indexes are higher and the Dollar/Yen is performing better. All of these indicate that investors are looking for risk today.
On Thursday, gold broke through its December 12, 2017 main bottom at $1251.90. Earlier today, it hit a low of $1246.90. If the selling pressure continues then we could see an eventual move into the July 7, 2017 main bottom at $1230.70.
Today’s price action puts gold in a position to post its worst monthly performance since November 2016. On December 29, 2017, Nearby Gold futures closed at $1314.00, a close today under $1251.00 will put it lower this year by almost 5 percent.
In economic news on Thursday, the U.S. Commerce Department that gross domestic product increased at a 2.0 percent annual rate in the January-March period. This, third and final estimate of first-quarter GDP came in below the 2.2 percent pace reported in the second estimate released last month. Traders were looking for a reading of 2.0 percent.
The government reported on Thursday that the number of Americans filing for unemployment benefits increased more than expected during the week-ending June 22, but the trend in claims remained consistent with a tightening labor market.
Additionally, two Federal Open Market Committee members warned about the harmful impact a trade war could have on economic growth. St. Louis Fed president James Bullard also said that a tightening labor market is one reason for the Federal Reserve to stop raising interest rates.
One of the main reasons for the weakness in gold has been expectations of at least two more Fed rate hikes this year. This news has prompted hedge funds to place large bets on a rising U.S. Dollar. At the same time, open interest on the long side of the gold market has dropped to a multi-year low because of the lack of investor capital.