Comex Gold

Price of Gold Fundamental Daily Forecast – Headline Driven Trade Deal Hope Forcing Out Speculative Longs

Gold futures are trading lower on Monday as growing hopes over a trade deal between the United States and China are weighing on gold’s appeal as a so-called safe-haven asset. Driving the price action are upbeat comments late last week by a pair of high-ranking U.S. officials close to the negotiators, and remarks over the weekend from a high-ranking Chinese official.

At 09:31 GMT, December Comex gold futures are trading $1460.40, down $8.10 or -0.54%.

Today’s reaction to the news is understandable since prices rose last week when the headlines read that the trade deal negotiations had hit a snag. Although the selling pressure is strong early Monday, there are still skeptics out there who cite the lack of details from the U.S. and China officials as reasons to remain cautious about the remarks.

The daily chart pattern reflects this tentativeness. Gold was trading $1446.20 when reports about a “snag” in the negotiations made headlines. The market was trading at $1475.50 when White House economic adviser Kudlow made bearish comments. The market is currently straddling $1460.90, or the mid-point of the trading range.

Trader reaction to $1460.90 will likely determine the direction of the gold market the rest of the session.

Some gold bugs are trying to build a case for another rally because of the turmoil in Hong Kong. However, this is not likely to be an issue unless China decides to aggressively intervene.

Last week’s remarks by Federal Reserve Chairman Jerome Powell are also weighing on prices. Powell essentially said the central bank will hold rates steady and will not cut again until there is extreme weakness in the economy.

Last week’s decision by the Reserve Bank of New Zealand is also pressuring prices. The RBNZ surprised investors by voting to keep rates on hold after the majority of traders had priced in a 25 basis point rate cut. Investors will now have to wait until February.

Weak Australian employment data helped raise the chances of another rate cut by the Reserve Bank of Australia (RBA), but not enough to put a December move on the board. The market seems to be leaning toward a February rate cut. This news is having little effect on gold prices.

Daily Forecast

As long as there is optimism over a trade deal, gold is likely to remain under pressure on Monday. The hope of a trade deal is helping to support the Euro and the British Pound, which is pressuring the U.S. Dollar.

Usually traders buy gold when the dollar goes down, but this is not the case at this time. Nonetheless, a steep plunge in the dollar could help slow down the selling pressure on gold.

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.