Price of Gold Fundamental Daily Forecast – Traders Unmoved by Middle East Tensions, Weaker Dollar Amid Low Holiday Volume

Gold futures are edging lower on Monday shortly before the regular session opening after failing to follow-through to the upside following last week’s stellar performance. There was a little divergence in the market earlier in the session, the spot market rose to its highest level in more than two months, but the futures market stayed inside Friday’s trading range. This tends to indicate investor indecision and impending volatility.

At 11:01 GMT, February Comex gold is trading $1514.60, down $3.40 or -0.22%.

Traders said the market may have surged in reaction to a weaker U.S. Dollar and U.S. military strikes in the Middle East.

The greenback has been under pressure for weeks as optimism about the outlook for a U.S.-China trade deal lifted investors’ appetite for risky currencies. The dollar also lost ground as hedgers shed positions placed as protection against an escalation of the trade war between the United States and China. Since the two economic powerhouses agreed to a “Phase One” deal at mid-month, trade tensions have eased, dampening the dollar’s appeal as a safe-haven asset.

A weaker U.S. Dollar tends to drive up foreign demand for dollar-denominated gold.

On Sunday, the U.S. military carried out “precision defense strikes” in Iraq and Syria against a militia group following a string of attacks on Iraqi bases that host American service members.

“In response to repeated Kata’ib Hizbollah (KH) attacks on Iraqi bases that host Operation Inherent Resolve coalition forces, U.S. forces have conducted precision defensive strikes against five KH facilities in Iraq and Syria that will degrade KH’s ability to conduct future attacks against OIR coalition forces,” chief Pentagon spokesman Jonathan Hoffman said in a statement Sunday.

“Iran and their KH proxy forces must cease their attacks on U.S. and coalition forces, and respect Iraq’s sovereignty, to prevent additional defensive actions by U.S. forces,” Hoffman added.

Gold is considered a safe investment in times of geopolitical and economic uncertainty.

Daily Forecast

The price action suggests that last week’s rally may have been overextended, which means it may be ripe for a near-term correction. Last week’s thin trading volume may have helped exaggerate the rally, so we may see a retracement of those gains as some of the bigger institutional traders return to the market after the New Year’s break on Wednesday.