Price of Gold Fundamental Daily Forecast – Buyers Sitting on Sidelines as Stimulus Hopes Fade

A shift in demand for higher-risk assets are driving gold futures lower on Wednesday, but losses are likely being limited by further U.S. Dollar weakness. A reversal in U.S. Treasury yields could also be pressuring demand for gold. Yields were dropping earlier in the session before mounting a turnaround. The price action in gold so far today seems to be in reaction to firming U.S. equity markets.

At 11:37 GMT, December Comex gold futures are trading $1872.30, down $12.80 or -0.68%.

Despite the weakness, gold futures continue to hold inside a tight range on Wednesday as investors were caught between optimism over the development of novel coronavirus vaccines and the chances of more economic support as the number of infections in some places surged.

The rangebound trade over the past seven sessions stems from sellers responding to the latest vaccine developments and buyers reacting to the rapid rise in the number of coronavirus cases in Europe and the United States.

Longer-term, we believe that gold will continue to be supported by the accommodative U.S. Federal Reserve, which translates into “buyers will come in on the hard breaks”.

Some traders feel that an expansion in the U.S. Federal Reserve’s quantitative easing program in December may weaken the U.S. Dollar and prove to be a tailwind for bullion.

Fed Chair Jerome Powell said on Tuesday the central bank was committed to using all its tools to drive an economic recovery. Powell also said it was not time to shut down emergency programs aimed at battling the economic fallout from the coronavirus pandemic, with cases again surging and the economy left with “a long way to go” to recover.

Extending the programs would require Treasury’s approval under the “lame-duck” Trump administration. Some Republicans in Congress have balked at keeping them open, particularly the program of lending for local governments.

Daily Forecast

Gold is having a hard time rallying even with the weaker U.S. Dollar and falling Treasury yields. Even yesterday’s weaker than expected U.S. retail sales data failed to drive up demand for the precious metal.

This supports the notion that buyers are sitting on the sidelines because of the lack of progress toward a new fiscal stimulus package. On Tuesday, Powell said the Fed is committed to “using all of our tools to support the recovery for as long as it takes until the job is well and truly done.”  But he also repeated his call for more fiscal support from Congress to bridge the gap for families until a vaccine is broadly deployed.

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