Comex Gold

Price of Gold Fundamental Weekly Forecast – Traders Monitoring New COVID Cases as Rising Dollar Caps Gains

Gold futures are trading lower on Monday as a surge in global coronavirus cases is driving investors to seek shelter in safe-haven U.S. Treasurys and the U.S. Dollar, proving once again that gold is no longer being perceived as a safe-haven asset, no matter what the old school brokers want to tell us. The price action suggests gold is being thought of as a risky investment albeit, one that doesn’t pay interest or a dividend.

At 09:15 GMT, August gold futures are trading $1802.70, down $12.30 or -0.68%.

Over the early part of the month, gold’s price action was driven by worries about inflation and Federal Reserve policy, but Monday’s early price action suggests this week’s movement will be driven by concerns over risk.

In the overnight session, gold is being pressured by a rising U.S. Dollar, which is reducing demand for the dollar-denominated asset, but losses are likely being limited by lower Treasury yields.

Treasury Yields Start the Week Lower, 10-Year Treasury Around 1.27%

U.S. Treasury yields dipped on Monday morning, with the 10-year falling to around 1.27%. The yield on the benchmark 10-year Treasury note fell 2 basis points to 1.275%. The yield on the 30-year Treasury bond dipped 2 basis points to 1.905%.

Investors are moving into Treasurys for protection in response to early weakness in U.S. stock indexes after the major averages posted their first negative week in four.

Inflation fears are weighing on stocks, with a U.S. consumer sentiment index from the University of Michigan released on Friday showing that consumers believe prices will jump 4.8% over the next year. This is the steepest climb since August 2008. Early last week, the June Consumer Price Index showed that inflation jumped 5.4% year-over-year, spooking investors.

US Dollar Jumps As Virus Looms

Investors are seeking shelter in the U.S. Dollar on Monday, driving the greenback to nearly its strongest level in months, as the spread of the delta coronavirus variant shook investors’ confidence in growth. Of primary concern for investors is the reopening of the economy in England.

“The market is really trading on the uncertainty in the air around COVID,” National Australia Bank senior currency strategist Rodrigo Catril said on the bank’s morning podcast.

Daily infections have been surging from the United States and Europe to Asia and the global seven-day average of new cases each day is over half a million for the first time since May.

Meanwhile, traders are now holding their breath as Monday marks the end of most social curbs in England and a shift from suppression to trusting vaccination s to prevent serious illness. Boris Johnson’s government is betting fully vaccinated people are less likely to get seriously ill with COVID-19.

Daily Forecast

Gold is likely to remain under pressure throughout the session because of the strength of the U.S. Dollar. With the greenback’s upside momentum building, it looks as if the dollar index is poised for a surge into its March 31 top at 93.430. This could trigger a pullback by gold into at least $1798.80 to $1770.40.

Uncertainly over the move in England to lift restrictions could also lift the dollar. Reuters is saying London epidemiologists are skeptical about the move while the prime minister, finance minister and health minister themselves are isolating as cases spread.

The market seems to be betting that more people will get sick. Gold traders will be watching the infection numbers closely in the U.K. because another surge should drive the dollar higher and gold prices lower.

For a look at all of today’s economic events, check out our economic calendar.

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.