Price of Gold Fundamental Daily Forecast – Pressured by Upbeat Comment from China

Gold futures are edging lower on Thursday after failing to follow-through to the upside following Monday’s surge to multi-year high. Bullish traders are showing almost no reaction to plunging U.S. 30-year Treasury bond yields and an inverted 2-year/10-year Treasury note yield curve, which some believe is a reliable predictor of future recessions.

At 09:12 GMT, December Comex gold is trading $1548.80, down $0.03 or -0.02%.

As I said on Wednesday, despite increasing fears of a recession as per the yield curve inversion, gold traders seem unwilling to chase this market higher. In my opinion, the buying has been weak since the market hit a high at $1546.10 on August 13. Currently, the market is trading only $2.00 higher than that number despite an escalation of the trade war and the plunge in U.S. Treasury yields.

Monday’s spike to $1565.00 is starting to look like it was fueled by buy stops rather than new money entering the market. If it was new money then it was likely from Asia and Europe since the rally occurred early in the session. Furthermore, Asian and European investors likely missed the move on Friday because their markets were closed when the volatility hit the United States.

Over the short-run gold is vulnerable to the short side. Falling under $1537.60 will erase all of this week’s gains, putting the market in a position to break further with targets coming in at $1527.00, $1502.10 and $1488.90.

Daily Forecast

With the market pricing in a 25-basis point by the Fed in September, and really only the yield curve inversion indicating a possible future recession, gold traders have no incentive to chase the market higher at current price levels, which leads me to believe the hedge funds may be taking a little off the top and booking profits.

Furthermore, just a short while ago, China said it wished to resolve its protracted trade dispute with the world’s largest economy with a “calm” attitude. When asked about its ongoing trade war with the U.S., China’s commerce ministry reportedly said Thursday that it was opposed to escalating trade tensions.

The comments from China drove investors into higher risk assets, sending stocks higher, while putting pressure on safe-haven gold, Treasurys and the Japanese Yen.

If this change in sentiment continues then gold prices could be pressured all session.