Price of Gold Fundamental Daily Forecast – Price Action Suggests Investors are Looking for Value

Gold is trading lower on Wednesday shortly before the regular session opening in New York. The price action continues to reflect the tentativeness of investors as the market hovers just shortly below a multi-year high.

Although the market has been on a tremendous run since May when the first hints of U.S. Federal Reserve rate cuts started to emerge, the buying has been weak since August 13, suggesting that perhaps investors are becoming concerned about chasing the market higher at current price levels. Perhaps they’re waiting for a pullback into a value area.

At 11:56 GMT, December Comex Gold is trading $1545.10, down $10.70 or -0.69%.

The recent breakouts to the upside have been spike moves, primarily fueled by short-covering and buy stops. However, Tuesday’s strong rally came after a steep decline on Friday. Do you get the picture? Traders are looking for value.

In order to keep the rally intact, I think we’re going to have to be willing to live with volatile swings. The longer-term trend is up and the fundamentals are supportive, however, buying dips and selling rallies may be the way to approach this market.

Wednesday’s price action once again indicates that traders are looking for value. The market is trading lower despite a weaker U.S. Dollar. Remember that gold is a dollar-denominated asset so when the dollar weakens, foreign demand is supposed to go up. We’re not seeing this today.

Furthermore, on Tuesday, the weaker-than-expected ISM US Manufacturing PMI report raised concerns over a U.S. recession, while increasing the chances of more aggressive rate cuts by the Fed later this year. This is also a bullish development for gold. The news did trigger a rally yesterday, but I believe that last week’s weakness brought in the buyers.

Daily Forecast

The fundamentals are bullish, but the price action suggests investors prefer value over momentum. Therefore, the best way to approach this market over the near-term is to wait for pullbacks into support zones then wait for the bullish news. This seems to be the way professional traders are approaching the market.