A weaker U.S. Dollar is helping to underpin gold futures early Tuesday. An easing of tensions over the trade dispute between the United States and China may be leading to increased demand for higher risk assets. This could be encouraging those investors who bought the dollar last week for protection to reduce their safe haven positions in the greenback.
At 0842 GMT, December Comex gold is trading $1221.30, up $3.60 or +0.30%.
Today’s session starts with gold slightly above a 17-month low reached late last week. This comes on the heels of fresh data from the Commodity Futures Trading Commission, showing that hedge fund and money managers had increased their net short positions.
Short-term this may be a contrarian indicator for those looking for a reason for a short-covering rally. Longer-term investors, however, feel that any rally will be met with fresh shorting and that gains will be limited because of expectations of further interest rate hikes from the U.S. Federal Reserve.
The on-going U.S.-China trade dispute has also been putting pressure on gold prices. As tensions escalate, investors have been moving money into the safety of the U.S. Dollar, leading to weaker foreign demand for dollar-denominated gold.
Today’s early price action indicates that gold prices will once again be controlled by the direction of the U.S. Dollar. Appetite for risk and U.S. economic data could play a role in its movement.
If tensions over the trade dispute continue to lessen then gold could pick up a bid as this is likely to pressure the U.S. Dollar.
In economic news, investors will get the opportunity to react to the latest data on JOLTS Job Openings, IBD/TIPP Economic Optimism and Consumer Credit.
The JOLTS Job Openings report is expected to come in at 6.74 million, up from 6.64 million.
The IBD/TIPP Economic Optimism report is forecast at 57.2, up from 56.4. Consumer Credit is estimate to have dropped from 24.6 to 16.2.