Gold futures are trading slightly lower early Monday after giving up earlier gains. All of the price action is being fueled by the movement in the U.S. Dollar. The Greenback is inching higher against a basket of major currencies excluding the Japanese Yen, which is trending sharply higher due to a domestic event.
At 0833 GMT, December Comex Gold futures are trading $1239.70, down $0.70 or -0.06%.
Supporting the market early in the session was a follow-through rally related to last week’s plunge in the U.S. Dollar, which was fueled by comments from U.S. President Donald Trump. Not only did Trump fuel a rally on Thursday by criticizing the Fed’s monetary policy, but he also fueled a further rally on Friday after tweeting additional comments about the negative impact on the economy caused by the Fed’s tightening and the strength of the U.S. Dollar.
Gold was further supported after Trump threatened China with additional tariffs, claiming he was ready to go all-in and impose on tariff on every product they export to the United States.
In other news, hedge funds and money managers switched to a net short position in COMEX gold contracts for the first time since 2016 in the week to July 17, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.
- Trump Wants a Strong US Dollar But Not Too Strong, Trade War Escalates
- US Dollar: What Powell Giveth, Trump Take Away; Yuan Plunges Amid Accusation of Manipulation
- Stocks Lower as Trump Threatens to Go All in on Tariffs Against China
There are additional headlines being printed that could have an effect on the direction of gold prices, but only if they affect the three main influences on gold at this time – appetite for risk, raising Treasury yields and the U.S. Dollar.
The best scenario for bullish gold traders would be lower demand for risky assets, a drop in Treasury yields due to flight-to-safety buying and a further break in the U.S. Dollar.
A mixed bag of fundamentals could lead to sideways-to-lower price action. And increased demand for risk, higher yields and a firmer dollar will be bearish for gold prices.
A couple of stories that could influence prices in the near future, but not likely today are the warning by the G20 nations that trade and geopolitical tensions could hurt economic growth and Iranian President Hassan Rouhani’s threat against the U.S. pursuing hostile policies against Tehran, and Trump’s subsequent threatening response.
The charts indicate that the trend is down and far from changing to up. A trade through $1278.20 will change the main trend to up, while a move through $1221.00 will signal a resumption of the downtrend.
If there is additional short-covering today then look for a possible test of $1249.60 to $1256.30. Since the main trend is down, sellers are likely to show up on a test of this range.