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Price of Gold Fundamental Daily Forecast – Gold Will Rally Once Stocks Stabilize

Gold futures are trading flat-to-lower shortly after the regular session opening on Thursday. The price action suggests investor indecision and impending volatility. The market has been highly correlated with stocks this week, and this relationship appears to be continuing today. Rising Treasury yields and a stronger U.S. Dollar have also weighed on demand for dollar-denominated gold.

At 13:40 GMT, April Comex gold is trading $1474.10, down $3.80 or -0.26%.

Essentially, the volatile price action in gold this week has been fueled by the stockpiling of cash. Investors sought to hoard cash in unstable market conditions despite additional measures from the European Central Bank (ECB) to deal with the economic fallout from the coronavirus outbreak.

Containing the Virus versus Protecting the Economy

So far investors haven’t responded much to loads of stimulus from governments and central banks. These moves have been implemented to boost the economy when the virus is contained, however, they are having very little short-term effect.

Cleary, investors want to see containment of the virus which means evidence that it has stopped spreading in the United States and positive movement toward a vaccine. At this time, no amount of credit and monetary stimulus can contain the virus, but it will make a difference later, once the economy starts to recover.

Reasons for Mixed Trade

The U.S. Dollar surged to a multi-year high earlier in the session, while bonds and stocks struggled to find their footing. Meanwhile, the announcement of the ECB’s latest stimulus measures provided only brief solace at a time when the global economy grapples to contain the pandemic.

Governments and Central Banks Take Measures to Combat the Economic Damage from the Virus

In Japan, traders are waiting for new economic stimulus packages. In Germany, the Chancellor urged citizens to adhere to rules aimed at reducing social contract

In the U.S., the Senate overwhelmingly passed legislation providing billions of dollars to limit the damage from the outbreak through free testing, paid sick leave and expanded safety-net spending.

More Near-Term Gold Selling Expected until Cash is Replenished

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.66% to 923.69 tonnes on Wednesday.

Gold owners are likely to continue to liquidate positions over the near-term in order to rebuild capital levels.

Daily Forecast

Gold investors are also watching the charts with $1468.30 to $1412.50 defined as a key support zone. Trader reaction to this zone will likely set the tone today. If there is a rally then $1577.60 to $1607.60 remains the primary upside target.

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.