Price of Gold Fundamental Daily Forecast – Core PCE Data Sets the Tone on Friday

Gold futures are edging higher on Friday as U.S. Treasury yields dipped in overnight trading and the U.S. Dollar tested a one-month low. The market is also in a position to close higher for a second straight week amid cooling bets for a more aggressive Federal Reserve monetary policy.

At 06:30 GMT, August Comex gold futures are trading $1858.30, up $4.40 or +0.24%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $172.77, down $0.31 or -0.18%.

Fed Minutes, US Economic Data Underpin Gold Prices

August gold futures are being underpinned by the Fed minutes that were perceived as much less-hawkish than traders were expecting. The price action suggests traders may now be anticipating fewer rate hikes on the back of slowing economic growth.

Helping to fuel this assessment was weaker-than-expected GDP and jobless claims data on Thursday.

First-quarter gross domestic product declined at a 1.5% annual pace, worse than the 1.3% Dow Jones estimate and a writedown from the initially reported 1.4%, the Commerce Department reported Thursday.

Additionally, initial claims for the week-ending May 21 totaled 218,000, which was an increase from the previous period and slightly higher than the 215,000 estimate.

Traders Focusing on Core PCE Report

It’s too early to say whether inflation has peaked or the economy has cooled without damaging the strong U.S. jobs market, but the market isn’t going to wait for the Fed to decide in September that its tightening has worked enough for them to reduce the chances of further aggressive rate hikes.

We’re dealing with futures so gold traders are going to discount any future events. However, gold is not going to rally on its own. It’s going to need help from Treasury yields and the U.S. Dollar. If both weaken enough, gold traders will buy bullion.

In other words, if gold traders believe the Fed is going to pause its aggressive rate hikes in the fall then they are going to respond to the future event at this time, not later.

From now until the Fed’s September meeting, the focus for gold traders will be on the performance of U.S. economic data. This includes inflation, growth and labor.

On Friday, gold traders will get the opportunity to react to several key reports including Core PCE, Personal Income, Personal Spending and Consumer Confidence.

The major report will be Core PCE. Economists are looking for a reading of 0.3%. A higher reading could put upside pressure on Treasury yields and the U.S. Dollar because it would imply a faster pace of rate hikes by the Fed. Gold prices could weaken on this news.

A reading at 0.3% or lower could spike gold prices higher.