Price of Gold Fundamental Daily Forecast – Are Hedge Funds Still Buying, or Public Chasing Headlines?

Gold spiked higher on Friday as investors shed risky assets and moved their money into U.S. government instruments. The result was a drop in Treasury yields which made gold a more attractive investment. The catalyst behind the rally was a U.S. airstrike that killed a high ranking Iraqi military official.

At 13:51 GMT, February Comex gold is trading $1548.60, up $20.50 or +1.35%.

The rally could stall over the near-term if there isn’t a quick retaliation by Iran. Everyone is expecting it so it may already be priced into the market. Earlier today, the market took out the September 24 top at $1549.90. The next objective is last year’s top or the September 4 high at $1571.70.

Treasury Yields Driving Price Action

Treasury yields sank Friday as investors fled for safer assets in the aftermath of a U.S. airstrike in Baghdad that killed Iran’s top military commander and escalated an already-tense power struggle between Washington and Tehran in the Middle East.

The yield on the benchmark 10-year Treasury note sank 5 basis points to 1.826% from highs around 1.9% in the previous session, while the rate on the 30-year bond fell a similar magnitude of 2.286%.

Gold doesn’t pay a dividend or interest but investors seem to like it when rates move toward 0%. It’s more of a position adjustment.

US Equity Markets Plunge

U.S. stock index futures were sharply lower Friday after the U.S. confirmed the airstrike that killed Iran’s top military commander. Investors fled risky stocks in favor of gold.

U.S. Economic Data

Later today at 15:00 GMT, traders will get the opportunity to react to the ISM US Manufacturing PMI report. It is expected to come in at 49.0, slightly better than the previously released 48.1, but still below the key 50.0 level.

The major report at 19:00 GMT is the Federal Reserve minutes from its December meeting. Investors will be looking for clues about a possible rate cut in March. The economy may not need it, but the Fed may make the move as insurance against an economic disaster.

Daily Forecast

Remember the hedge funds have been long gold for about two months. They built the elongated support base on the charts. The public is chasing gold higher now and the hedge funds may be selling it to them. Guess who’s going to be holding the bag at the top? The gold bugs who trade the headlines. Happy Speculating.