Price of Gold Fundamental Daily Forecast – Price Action Mirroring Stock Market Movement

Gold futures have been trading in two directions all session on Tuesday. Early in the day, the market was higher as a rebound in global equity markets indicated that perhaps aggressive central bank monetary policy action may have finally solved the liquidity problems in the markets. However, prices turned lower as stocks fell sharply from their highs.

At 12:47 GMT, April Comex gold is trading $1481.10, down $5.40 or -0.36%.

Continue to operate from the standpoint that gold is not a safe-haven asset. At this time, cash and bonds are the true safe-havens. That’s where all the money from the stock market has been going, creating a liquidity problem for banks and Wall Street.

Stock market selling has also created margin calls for leveraged buyers. Traders have been treating gold as the “go to” for the liquidity to answer those margin calls.

Sharply falling oil prices could also weigh on gold prices if Russia and Saudi Arabia, for example, start to sell gold to raise cash. Although both claim they can manage their budgets at $30 crude, prices could continue to decline to $25, $20 or even $15 per barrel. At these levels, the Russians and Saudis, along with other major oil producers could start selling their gold holdings to keep their respective economies functioning.

As we saw earlier in the session, gold could get a boost if stocks start to rise. This will take some of the heat off those waiting for the next round of margin calls. However, if the selling in the stock market resumes today, we could see gold lose as much as $100 in value.

The catalyst behind a stock market rally will likely be the announcement of U.S. government stimulus. If U.S. legislators can push through a massive bailout plan then stocks could rally sharply, triggering a spike to the upside in gold.

BREAKING NEWS:  What’s creating some of the choppy, two-sided trade and has gold investors leaning to the upside is the news that the Trump administration wants $850 billion in new stimulus to curb coronavirus damage, according to reports.

Treasury Secretary Steven Mnuchin is heading to the Capitol on Tuesday to discuss it with Senate Republicans. Earlier in the week, Congress passed emergency funding to slow the outbreak and is working on approving a plan that includes paid leave provisions.

Gold prices could soar if this story starts to gain traction, increasing the odds of a bailout deal.

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.