Price of Gold Fundamental Daily Forecast – Traders Bracing for Tariff Decision

December 12, 2019

New York (Dec 12)  Gold is trading marginally higher on Thursday shortly before the regular session opening. The market is trading inside yesterday’s range which suggests investor indecision and impending volatility.

The indecision is being fueled by uncertainty over the outcome of the Brexit vote and worries over U.S.-China trade relations. On Wednesday, gold surged after the U.S. Dollar plunged in reaction to dovish decisions from the U.S. Federal Reserve. So far, we have not seen a follow-through to the upside.

At 12:46 GMT, February Comex gold is trading at $1479.40, up $4.40 or +0.29%.

Brexit Vote

Uncertainty over the outcome of the British election seems to be holding gold traders hostage on Thursday.

At 07:00 GMT, voting began in the United Kingdom, where polls have tightened recently but still predict a Conservative victory. The markets have priced in a Conservative majority that could control parliament and lead Britain out of the European Union at the end of January, and anything short of that could prompt a negative reaction in the financial markets that could drive up demand for gold.

A favorable outcome could send the British Pound higher, driving down the U.S. Dollar Index in the process. This could also increase demand for dollar-denominated gold.

Fed Keeps Rates Unchanged, Signals No Policy Change

The U.S. Federal Reserve kept interest rates unchanged on Wednesday, following three decreases in a row. The central bank also indicated it does not expect any policy changes through at least 2020.

Fed Chair Jerome Powell said in a news conference the central bank would have to see a persistent rise in inflation before hiking rates once again. The Fed had to cut rates multiple times this year to make up for raising rates too far at the end of 2018, a move that slowed the economy and caused stock prices to drop.

Trump to Meet with China over Tariff Deadline

U.S. President Donald Trump is expected to meet with top trade advisors on Thursday to discuss planned December 15 tariffs on some $160 billion in Chinese goods, three sources familiar with the plans said, according to Reuters, as markets braced for potential negative impacts.

The senior advisors are expected to present divergent views during the high-stakes meeting, but the final decision will be up to Trump, the sources said.

Daily Forecast

Gold traders are being cautious on Thursday, but not because of the outcome of the U.K. elections, but because of the uncertainty over whether the U.S. will impose new tariffs on Chinese imports on December 15.

The Fed news is helping to underpin gold prices, which may be good for the precious metal over the longer-term, but traders want to know about the short-term outlook.

Gold prices are likely to rise if Trump says yes to the tariffs. This news could be a deal breaker with China, which could rattle the financial markets. Gold would benefit from any market turmoil.

Gold prices are likely to be capped, or could even plunge if Trump decides to delay the tariffs, and/or if a partial trade deal is announced.


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