Price of Gold Fundamental Daily Forecast – Better-Than-Expected Initial Claims Report Fails to Impress

Gold futures are trading higher shortly after the regular session opening and near its new contract high set earlier in the session despite a firmer U.S. Dollar. Gold jumped to another record high on Thursday as COVID-19 pandemic continued to raise concerns over the pace of the global economic recovery. The dollar is being supported today by receding risk sentiment.

At 12:52 GMT, December Comex gold futures are trading $2.068.20, up $18.90 or +0.92%.

U.S. Weekly Jobless Claims Come in Better-Than-Expected

Weekly jobless claims hit their lowest level of the pandemic era, totaling 1.186 million last week, well below Wall Street expectations. Economists surveyed by Dow Jones had been looking for 1.42 million. The level for the week-ended August 1 represented a drop of 249,000 from the previous week.

Amid worries that the employment picture was faltering after two record-breaking months of job creation, the claims number indicates some momentum. Continuing claims, or those who have collected benefits for two straight weeks, dropped by 844,000 to 16.1 million.

The last time the weekly claims number was this low was March 14, just as the coronavirus hit pandemic status and the U.S. economy came to a standstill in an effort to halt the spread.

White House Threatens Executive Action on Coronavirus Relief

The Trump administration threatened on Wednesday the use of executive action to provide coronavirus relief as negotiations still haven’t led to a deal. “If Congress can’t get it done, the president of the United States will,” White House chief of staff Mark Meadows told CNN. One of the key issues keeping both sides from reaching a deal is the extension of a weekly unemployment benefit that expired last week.

Democrats want to extend the benefit at the original $600-per-week rate while Republicans argue that’s a disincentive for people to go back to work.

Daily Forecast

Gold should continue to hover around all-time highs as long as the coronavirus continues to create worries about a slowdown in global economic growth. This translates into “until we get a vaccine.”

While fiscal stimulus is good for gold prices over the short-run, monetary stimulus from the Fed should continue to provide long-term support.

That being said, we continue to support the long side of gold, but realize we may see some sharp retracements of the rally due to unforeseen technical factors. Some analysts are calling the market overbought and ripe for a correction. However, rather than treat this as a bearish indicator, with the trend so strong, it’s probably a good idea to identify new entry points rather than press the short side.