Price of Gold Fundamental Daily Forecast – US Manufacturing PMI Data Likely to Set Tone

Gold futures are under pressure for a fifth straight session on Tuesday on long-liquidation and fresh shorting pressure amid a surge in the U.S. Dollar to multi-year highs. The pressure on gold is also being fueled by increased demand for risky assets, stronger-than-expected U.S. economic data and firmer Treasury yields.

At 09:07 GMT, December Comex gold is trading $1469.60, down $3.30 or -0.22%.

The catalysts behind the selling pressure are optimism over U.S.-China trade relations and the notion that the Federal Reserve will hit the pause button on a third consecutive rate cut at its October 29-30 monetary policy meeting.

US-China Trade Exerting Most Influence

Gold was supported throughout the third quarter by tensions between the U.S. and China that cast a shadow over the global economy. Furthermore, aggressive rate cuts by the major central banks, an inverted U.S. Treasury yield curve and fears of a recession, all came together to drive gold prices to multi-year highs.

The current leg down in gold has been primarily fueled by the announcement of the resumption of trade talks between the two economic powerhouses on October 10-11. Recently, both sides have been playing nice, with China offering to buy more soybeans and the U.S. granting a delay in new tariffs until October 15, after the meeting.

The price action in gold and equity markets suggests investors are betting on the hopes of a compromise. While some investors believe the situation between the two countries won’t resolve itself before year end, others believe both sides will accept a partial settlement that could be good news. This is doubtful, however, especially after President Trump said last week, he would not accept a “bad deal”.

Daily Forecast

We’re looking a busy day if the slew of economic reports and scheduled Fed speakers is any indication.

The key report is ISM Manufacturing PMI. It is expected to come in at 50.4, up from 49.1. It’s very important that this report come in above 50.0 because a reading under this level will indicate a contraction in the manufacturing sector.

Currently, investors have low expectations for an October rate cut. However, a weak Manufacturing PMI report could raise the chances. This would weaken the dollar and likely fuel a short-covering rally in gold.

Traders will be watching the Fed speakers to see if they support another rate cut in October, or if they believe the Fed should “wait and see” until December.

Technically speaking, the daily chart indicates the gold market is vulnerable to a more than $60 plunge over the near-term.