Gold Fundamental Forecast – September 5, 2016

Gold recovered all its losses since Yellen’s speech at Jackson Hole a week ago after the release of a lackluster jobs report in the US. Unemployment remained steady of 4.9% and the US created less jobs than expected but there was an upward revision to the previous report which helped the 3-month average, but most likely took the Fed decision to increase rates this month off the burner.

Investors should be wondering about the Fed’s politics because its interest-rate-setting committee will meet two more times before Election Day — Sept. 20-21 and Nov. 1-2.

What the Fed decides to do at those meetings could have enormous political consequences, if you assume that a rate hike would cause the stock market to fall, and that a higher stock market would translate into better odds for the Democratic Party. Both assumptions have strong historical support.

Gold gained almost $14 within minutes of the jobs report. Gold had been trading slightly in the red before the release. The metal is at 1331.00.

Some Fed officials remain concerned about lifting rates amid excessively low inflation and economic growth averaging just 1% at an annual rate the past three quarters. Sluggish exports and business investment amid a weak global economy and low oil prices have offset strong consumer spending. The worries have prompted the Fed to hold its key rate steady after raising it in December for the first time in nine years.

Also muddying the picture: The Labor Department has underestimated August employment gains the past five years by an average 62,000, based on subsequent revisions, according to an analysis by High Frequency Economics. That could ease any jitters caused by a weak August tally, though economists said a poor showing still would likely prompt the Fed to hold off on a rate hike.

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Upcoming Economic Events that you should be monitoring:

 September 5, 2016

Government Bond Auctions

Date Time Country Auction

Sep 06 11:00 Austria Holds bond auction

Sep 06 11:30 UK 1.5% 2026 Gilt

Sep 06 11:30 Germany Holds I/L bond auction

Sep 07 10:30 Denmark Holds bond auction

Sep 07 11:03 Sweden Holds bond auction

Sep 07 11:30 Germany Eur 5bn 0% Aug 2026 Bund

Sep 08 11:00 Ireland Holds bond auction

Sep 08 17:20 Italy Announces details of bond auction