Price of Gold Fundamental Daily Forecast – Pressured by Appetite for Risk, Firmer Yields

Gold prices are trading lower on Tuesday after running into technical resistance the previous session. Contributing to the selling pressure is increased demand for riskier assets and a rise in U.S. Treasury yields. Helping to underpin the market may be a weaker U.S. Dollar. The slight recoveries in stocks and Treasurys is encouraging investors reducing gold’s appeal as a safe-haven asset.

At 11:18 GMT, June Comex gold is trading $1320.70, down $8.30 or -0.64%.

Traders are saying that concerns over a U.S. recession may have been overblown this week with many investors overreacting to an inversion in the yield curve. The 10-year U.S. Treasury yield fell below the yield for the three-month Treasury bills for the first time since 2007, inverting the yield curve and increasing predictions for a U.S. recession later in the year.

John Sharma, economist at the National Australian Bank said, “Though concerns have gone up, we are not hundred percent sure there is going to be a recession as the yield curve inversion should be there for a whole quarter and not just for a day or two.”

Daily Forecast

Despite the pre-emptive calls for a recession, there may be some substance to the prediction, however, not at this time. Although the Fed sees weakness developing in the economy, Chairman Powell still sees pockets of strength and does not foresee a recession.

Furthermore, earlier this week, Chicago Federal Reserve President Charles Evans says the U.S. economy has slowed, but he downplayed chances of a recession.

He also said, “I think we have to be a little bit nervous obviously.”

Evans further added, “Whenever the yield curve gets flat, we see growth decelerating and, like I say, I’m looking for almost 2 percent growth this year. That sounds kind of low but it’s actually relative to trend of one-and-three-quarters, it’s a good growth rate.”

“I think anytime the economy decelerates from 3.1 percent down to 2 percent, it takes a really sharp-minded focus to kind of go, ‘All right, it’s less than what we had but it’s still pretty good,” he added.

Evans finished by saying, “I look at the nature of the U.S. economy, I look at the labor market, it’s strong, the consumer continues to be strong,” he said.

Given Evans assessment of the economy, gold prices are likely to be capped over the near-term, but supported on short-term dips. Risk of a U.S. economic slowdown have gone up and the Fed has stopped raising rates, which is providing some support for gold, however, there is just not enough there to cause gold prices to skyrocket at this time.