Price of Gold Fundamental Daily Forecast – Focus Remains Global Bond Yields, Chinese Yuan Midpoint Fix

Gold prices are trading higher early Friday, and for a second session, are moving inside the previous day’s trading range. The price action indicates short-term investor indecision and impending volatility. The fact that it remains in the upper end of its multi-year range indicates a strong bias to the upside.

At 08:07 GMT, December Comex gold is trading $1513.30, up $3.80 or +0.25%.

The price action likely means that investors are taking a short-term break after rallying more than $80 this month. However, the fundamentals remain strong enough for investors to maintain a bullish long-term outlook.

The main focus for gold traders remains the Chinese yuan mid-point fix because it seems to set in motion all the other events that have been driving the price action this week such as the direction of global bond yields and demand for risky assets.

The People’s Bank of China fixed its midpoint for the yuan at 7.0136 against the dollar on Friday – the second time this week the benchmark was set weaker than 7. The onshore yuan last traded at 7.0506 against the greenback, and the offshore yuan moved at 7.0770 per dollar.

The PBOC allows the local currency to fluctuate against the greenback with a narrow band of 2% from each day’s midpoint. With 7.0136 the mid-point, the range is 7.1539 to 6.8733.

Daily Forecast

Gold futures are in a position to post their best weekly performance in more than three years, as an escalation in the U.S.-China trade dispute and fears of a global economic slowdown encouraged aggressive rate cuts by several central banks, leading to a plunge in global bond yields.

The steep drop in yields raised fears of a global recession. This is the focus for gold traders. Furthermore, several central banks are offering negative interest rates. Although holding gold pays no interest, zero interest is better than paying a government to borrow your money.

The setting of the Chinese yuan midpoint appears to be the event that sets in motion the other factors that are driving the price action – namely, lower yields and lower demand for risky assets. The key midpoint level to watch is 7 yuan to the dollar. Look for gold to rally if the yuan dips below this level.

There may be a late session surge in prices if gold investors decide to carry positions over the weekend in the hopes bullish news.