Price of Gold Fundamental Daily Forecast – Better US Economic Data Weighs on Prices

Gold futures closed lower on Friday but a late session rally prevented a much steeper loss. Nonetheless, the market dropped to its lowest level in over a week early in the session before posting its second straight weekly decline. The catalyst behind the weakness was a strong rebound in the dollar and a resurgence in U.S. business activity.

On Friday, December Comex gold futures settled at $1947.00, down $8.60 or -0.44%. For the week, gold was down 2.80%, while prices retreated sharply from above $2,000 hit earlier last week.

A strong U.S. Dollar probably contributed the most to the weakness in gold. The greenback was up 0.6% against a basket of currencies, making dollar-denominated gold more expensive for foreign buyers.

Demand for risky assets also played a role in the weakness with the major U.S. stock indexes finishing higher. Meanwhile, U.S. Treasury yields inched higher after data showed an uptick this month in business activity to the highest level since early 2019.

Investors were also watching the developments surrounding the U.S. coronavirus relief bill after U.S. House of Representatives Speaker Nancy Pelosi on Thursday said she opposed a smaller coronavirus relief bill.

US Business Activity Surges to Early 2019 Levels:  Markit Flash PMI

U.S. business activity snapped back to the highest since early 2019 this month as companies in both the manufacturing and services sectors saw a resurgence in new orders even as new COVID-19 cases remain stubbornly high across the country, a purchasing managers’ survey showed on Friday.

Data firm IHS Markit said its flash U.S. Composite PMI Index rose to a reading of 54.7 this month – the highest since February 2019 – from 50.3 in July. Its flash – or – preliminary – indicator for the manufacturing sector stood at its highest since January 2019 and for the services sector it was the highest since March 2019.

“Driving the overall upturn in output was stronger client demand,” Markit said in its report. “Total new business rose for the first time since February and at a solid rate. Manufacturing firms registered a steeper expansion in new order inflows than in July, while service providers signaled a renewed increase in sales.”

Markit’s services sector flash PMI increased to 54.8 from a reading of 50 in July. Economists polled by Reuters had forecast a reading of 51 for the services sector, which accounts for roughly two-thirds of the U.S. economy.

Meanwhile, factory activity climbed for a fourth straight month, with the flash manufacturing PMI increasing to 19-month high of 53.6 from a reading of 50.9 in July. Economists had forecast the index for the sector, which accounts for 11% of the economy, advancing to 51.9 in August. A measure of new orders received by factories climbed to a reading of 54.3 from 51.3 in July. Output also rose.

US Home Sales Surge

In signs an economic recovery may be picking up speed, US. home sales rose at a record rate for a second straight month in July. With mortgage rates holding near record lows and a work-from-home trend apparently enticing many Americans to move further from city centers, the National Association of Realtors said on Friday sales of existing homes rose 24.7% to a seasonally adjusted annual rate of 5.86 million units last month from 4.7 million in June.

Short-Term Outlook

The better-than-expected U.S. economic data gives the Fed more evidence to delay making changes to its current monetary policy. We saw gold break sharply on Wednesday when the Fed failed to signal any additional monetary stimulus in its latest minutes.

For a look at all of today’s economic events, check out our economic calendar.