Price of Gold Fundamental Daily Forecast


Gold futures are trading flat Tuesday morning after posting a technical reversal the previous session following a test of its lowest level since August 11. out of the way before real buyers can take control. In other words, gold rose because the weak shorts decided to bail out, not because of the presence of strong buyers.

As of 03:13 GMT, December Comex gold traders are trading at $ 1,763.90, up $ 0.10 or + 0.01%.

Monday’s short hedging rally was likely fueled by lower Treasury yields and hedge buying linked to the steep decline in global equity markets. The strength of the US dollar likely put the brakes on the rally.

Gold has not risen because it is a safe haven. Gold is an investment, not a safe haven. This is old school thinking. The real safe havens are US Treasury bills, the US dollar and the Japanese yen. When there are issues like potential contagion from the financial crisis from China, investors want security and liquidity. For some, gold is a safe haven, but liquidity cannot be compared to the Treasury and the currency markets.

A few weeks ago, I read an analysis on FXEmpire.com where a man said gold would rally in an upcoming stock market crash. On September 2, the benchmark S&P 500 hit an all-time high of 4,545.85. On September 20, it hit a low of 4,305.91. This is a loss of 5.28%. On September 3, December ExCom gold hit a high of $ 1,836.90. On September 20, it hit a low of $ 1,742.30. This is a loss of 5.15%. So if you do the math, gold has outperformed the S&P 500 Index since September 3.

I am sarcastic, of course. What I mean is that the direction of gold is controlled by interest rates and sometimes by the US dollar. Gold tends to react to stock market crashes when the Federal Reserve floods the financial system with massive amounts of liquidity. I don’t think they’re going to do it now just a day before the start of a two-day meeting where they’ll discuss whether to start taking liquidity out of the market.

So if gold goes up from current price levels, the move is likely to be fueled by short hedging and squaring positions. If the stock market drops another 5-10% in a short period of time, the Fed may have to do something, but it is out of a lot of tools in its toolbox with interest rates already close to. zero.

The chances of a strong gold rally are slim as I don’t think the Fed will cut rates because it can’t and I don’t think it will increase its bond purchases to provide more liquidity because it is about to cut back its massive stimulus program. At best, the Fed will leave its bond purchases at current price levels and let the cut pass until later in the year when the stock market may be more stable.

Even if gold rises higher, this will likely be another short selling opportunity.


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