Price of Gold Fundamental Daily Forecast – Gold Bulls Hoping for Dovish Signal from ECB

Gold futures are trading lower, but inching higher from its intraday low of $1280.80 as investors continue to defend a major technical support level at $1279.60. The price action suggests investors are trying to establish support. However, it doesn’t seem to be enough that Treasury yields are dropping, equity markets are falling and he U.S. Dollar is a little weaker.

At 11:02 GMT, April Comex Gold futures are trading $1287.00, down $0.60 or -0.03%.

Essentially, a drop in appetite for risky assets is offering some support for safe-haven gold, but gains are being limited by concerns the dollar may take off to the upside and Treasury yields will spike higher if a U.S.-China trade deal is announced in a timely manner.

Two events this week could determine the next major move in gold prices. On Thursday, the first event is the European Central Bank interest rate and monetary policy decisions. On Friday, investors will get the opportunity to react to the latest data on U.S. Non-Farm Payrolls.

Gold could rally today if the ECB announcements come across as dovish. Policymakers are widely expected to leave interest rates unchanged, but traders aren’t certain what, if anything, the ECB will do about long-term support programs.

Furthermore, the ECB is expected to cut growth forecasts and is likely to provide a strong signal to traders that fresh stimulus is coming in the form of more cheap loans.

In other news that could be supportive for gold prices if it leads to lower global interest rates, the Organization for Economic Co-Operation and Development cut forecasts again for the global economy in 2019 and 2020, as it warned that trade disputes and uncertainty over Brexit would hit world commerce and businesses cascading concerns on global growth.

Daily Forecast

Today’s price action suggests that gold investors may be starting to price in the announcement of additional stimulus measures by the ECB. The degree of the reaction by traders the rest of the session will be determined by the size and the type of stimulus.

Despite the potential for additional stimulus from the ECB, which would be bullish for gold prices, most traders agree that the announcement of a trade deal between the United States and China would be bullish for the U.S. Dollar, which would put pressure on gold prices.

We could see a spike in gold prices on short-covering if the ECB announces stimulus, but gains are likely to be limited by worries over a trade deal. Furthermore, traders may want to wait until after Friday’s U.S. Non-Farm Payrolls report before taking a position. Bullish numbers could drive Treasury yields higher as well as the U.S. Dollar, and this would put further pressure on gold prices.