Price of Gold Fundamental Daily Forecast – Manufacturing PMI Report Could Make or Break Market Today

Gold prices are being pressured on Monday by rising U.S. Treasury yields, a stronger U.S. Dollar and increased demand for higher risk assets. The moves are being fueled by the hope of a U.S. trade deal after U.S. President Donald Trump and Chinese President Xi Jinping agreed over the weekend to restart the negotiation process.

At 11:33 GMT, August Comex gold is trading $1395.90, down $17.80 or -1.26%.

Although both economic powerhouses still have many issues to work out before a permanent deal to end the trade dispute can be implemented, the news is creating uncertainty for gold traders and this is enough to encourage bullish investors to lighten up on the upside.

The Trump-Xi decision to restart trade negotiations has gone way beyond the gold market. Adjustments are also being made in the Treasury, Forex and equity markets.

In the Treasurys, traders are reducing bullish bets on a Fed rate cut in late July because the news may encourage Federal Reserve policymakers to continue to take a “wait and see” approach before deciding a rate cut is necessary.

In the Forex markets, higher U.S. Treasury yields are helping to underpin the U.S. Dollar against a basket of currencies. Once again investors have to adjust positions to reflect the possibly of no rate cut in July. Since gold is a dollar-denominated investment, foreign demand for the precious metal tends to drop when the greenback rises.

The rise in demand for equities, or riskier assets means lower demand for so-called “safe-haven” assets like gold.

Daily Forecast

Due to the drastic change in the narrative for bullish gold traders in less than a week, gold traders should brace for heightened volatility. The selling started on June 25 when Federal Reserve President Jerome Powell and St. Louis Fed President James Bullard dampened the chances of a 50 basis point rate cut in late July. The selling is continuing on Monday as traders price in the possibility there will be no rate cut at all.

Of course a lot can happen in the economy before the July 30-31 Fed policy meeting so gold is still likely to be underpinned in the meantime unless several key reports this week point to the need for a rate cut.

The key report today that can crush gold or turn it around is the ISM Manufacturing PMI at 14:00 GMT. Traders are looking for a reading of 51.3. This is down from the previously reported 52.1. A reading under 50 will indicate contraction. This could be bullish for gold prices. On the flip-side, a higher-than-expected number will be bearish for gold because it will reduce the chances of a Fed rate cut.