Price of Gold Fundamental Daily Forecast – Aversion to Risk is Still the Market Driver

Gold surged to nearly a two-month high on Wednesday as tensions rattled throughout global markets. This sent investors out of higher-risk assets and into the safety of gold, the Japanese Yen, Swiss Franc and government debt. The U.S. Dollar fell against a basket of currencies which made dollar-denominated gold a more attractive asset.

December Comex Gold futures settled at $1279.30, up $16.70 or +1.32%.

U.S. stocks closed lower as U.S. – North Korean relations heated up. Investors continued to react to President Trump’s warning to North Korea on Tuesday about facing “fire and fury” if North Korea delivers more threats against the U.S.

North Korea responded by saying it was “carefully examining” the idea of a missile strike on Guam, a U.S. Pacific territory.

It was a light news day in the U.S. Preliminary Non-Farm Productivity rose 0.9%, which was disappointing. Investors were looking for a 0.7% read. The report measures production efficiency and a higher number is not good for the dollar. Preliminary Unit Labor Costs, the annualized change in the price businesses pay for labor, came in below expectations at 0.6%, below the 1.1% forecast. This also was disappointing for the dollar.

Forecast

Gold is inching higher early Thursday, but yesterday’s high remains intact. Yesterday, the market took out last week’s high at $1280.30. This makes $1305.50 the next major upside target.

The lack of follow-through to the upside suggests that risk aversion is settling a little. Additionally, Asian stocks settled and U.S. Treasury bond prices fell slightly in the pre-market trade.

Earlier in the session, North Korea continued to dismiss the warning from President Trump, saying it was a “load of nonsense”. Additionally, it outlined detailed plans for a missile strike near the Pacific territory of Guam.

Although gold traders are likely to remain focused on the U.S.-North Korean situation, there are a few economic reports that could garner a response from U.S. Dollar and gold traders.

U.S. producer inflation is expected to come in at 0.1%, unchanged from the previous month. Core PPI is expected to rise by 0.2%. Weekly unemployment claims are expected to come in at 240K, the same as last week.

New York Fed President William Dudley is also scheduled to speak. He is considered one of the most powerful members of the Federal Open Market Committee. He tends to lean toward the dovish side, but close to the middle and Fed Chair Janet Yellen.