Price of Gold Fundamental Daily Forecast – Strong Greenback Weighing on Demand for Dollar-Denominated Bullion

Gold futures are trading nearly flat on Tuesday after hitting its lowest level since August 9, 2021 earlier in the session. Helping to cap gains are a surge in the U.S. Dollar against a basket of major currencies. A dip in Treasury yields overnight could be helping to limit losses.

At 09:54 GMT, August Comex gold futures are trading $1733.40, up $1.70 or +0.10%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $161.45, down $0.85 or -0.52%.

The market fell on Monday as the dollar climbed higher against most its major counterparts on safe-haven demand amid recession worries as Russia turned off Nord Stream 1 for annual maintenance. The biggest fear is that Moscow could extend the shutdown due to the war in Ukraine.

Despite the clearly bearish fundamentals, the price action suggests traders are a little tentative due to economic releases this week covering consumer and producer price inflation, retail sales and industrial production.

The economic data could offer clues as to whether inflation has peaked as the Federal Reserve moves closer to its July 26 -27 monetary policy committee meeting. The early consensus suggests a higher-than-expected Consumer Price Index (CPI) print on Wednesday could be a major negative for gold prices because it would greenlight another 75 basis point rate hike by the Fed.

Treasury Yields Dip

U.S. Treasury yields ticked downward on Tuesday as traders prepared for key inflation figures due out later this week.

The 2-year dropped 6 basis points to trade at 3.0078% but remained above the 10-year Treasury, which dropped 6 basis points to 2.9225%, dropping back the 3% mark. The yield on the 30-year Treasury bond traded 5 basis points lower at 3.1257%.

Weak Euro Driving Dollar Index Higher

The U.S. Dollar Index, which is comprised of six major peers, with the Euro most heavily weighted, is currently testing its highest level since October 2002 at 108.26.

Meanwhile, the Euro is hovering close to a 20-year low near parity to the dollar on Tuesday amid concerns that an energy crisis could tip Europe into recession, while the U.S. Federal Reserve continues to aggressively tighten policy to curb inflation.

Short-Term Outlook

Gold Trading 101 says bullion is likely to lose value if interest rates rise and the U.S. Dollar increases in value. These factors are essentially driving the market lower and keeping gold buyers on the sidelines.

Although we may see a periodic short-covering rally, it doesn’t make sense to the major investors to buy non-yielding gold when they can get paid to own Treasurys. Furthermore, the rising dollar is making bullion too expensive to attract foreign buyers.