Price of Gold Fundamental Daily Forecast – Bearish Reaction to UK Election, Stronger Dollar

Gold prices attempted to rally early in the session before turning lower. The buying was the initial response to the news that the U.K. elections produced no clear winner which could plunge the market into a new bout of political turmoil before the start of Brexit negotiations. The selling was related to a surge in the U.S. Dollar which weakened demand for dollar-denominated gold.

On Thursday, August Comex Gold futures closed at $1279.50, down $10.00 or -0.78%. Early Friday, the market is trading $1274.70, down $4.80 or 0.37%.

The market was pressured on Thursday during former FBI Director James Comey’s testimony before the U.S. Senate Intelligence Committee. Traders sold gold after Comey’s testimony failed to offer any new information, nor made it clear that President Trump obstructed justice.

The U.S. Dollar was boosted after the European Central Bank left interest rates unchanged and lowered its inflation forecast. The ECB essentially closed the door on more interest rate cuts on Thursday. It said the Euro Zone economy appeared to be rebounding, but said inflation looks to remain weak for years so it still needs to put out cash to support it.

A steep plunge in the British Pound was also supportive for the U.S. Dollar.

Forecast

Then current price action strongly suggests that gold will continue to fall as long as the U.S. Dollar continues to rally. This means the direction of the gold market is being controlled by the events in the U.K. and the steep drop in the British Pound.

We’re looking for August Comex Gold to potentially reach $1260.00 to $1258.30 as long as it remains under $1281.50.

The market could pick up strength if buyers can retake $1281.50. If this occurs then $1296.50 will become the primary upside target.