Gold Fundamental Forecast – September 7, 2016

Gold gained over $12 to trade at 1338.75 as it looks like a rate increase will be off the table at the September meeting.  With the G20 over and nations promising to work to promote growth and President Obama reaching some diplomatic agreements with other nations it looks like the world is in better shape. The debate over the speed and aggressiveness of Fed interest-rate changes has been pinned to each economic release but the payrolls report carried additional weight for financial markets. Prospects for higher interest rates can boost the dollar and dull the appeal of greenback-priced gold. Rising rates also can turn off investors from precious metals, which don’t bear yield.

As for the next clues in the rate guessing-game, economic data due for release Tuesday includes the 10 a.m. Eastern time report on the service economy from ISM. The August reading is expected to hold close to the 55.5 reading of the prior month. Any number above 50 signals expansion.

The metal hit a two-month low of $1,301.91 last Thursday on prospects that a strong non-farm payrolls report for August could put the Fed on track to raise rates soon. Gold bounced back, however, when the data missed expectations. “An isolated rate hike in September would not have substantial negative impact on gold,” Danske Bank senior analytes Pedersen said.

“What would be important for the gold market is whether a rate hike this year signals that now the Fed is ready to speed up the hiking cycle, because then the whole normalization of rates would be back on the agenda.”

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which the metal is priced.

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Upcoming Economic Events that you should be monitoring:

 September 7, 2016

Government Bond Auctions

Date Time Country 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