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James Hyerczyk
Gold Bars and Dollar

Gold prices are inching higher on Friday after a steep plunge the previous session produced a new low for the year. Pressuring prices were a surge in Treasury yields and spike to the upside by the U.S. Dollar. Today’s mild strength is likely position-squaring and profit-taking ahead of tomorrow’s U.S. Non-Farm Payrolls report. If bullish, this could trigger another wave of selling pressure with the next target the psychological $1250.00 level.

The catalysts behind the selling pressure were comments on Wednesday from Fed Chair Jerome Powell. His remarks spooked gold bulls because they indicated the Fed would not be cutting rates later in the year as previous priced into the market.

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After the Fed interest rate and policy announcements on Wednesday Powell stated that there was no need for any readjustment in prices anytime soon and that inflation tasks were based on transitory factors. The news triggered a sell-off because gold investors were beginning to price in a U.S. rate cut later this year.

As far as the dollar is concerned, it was supported by the rise in Treasury yields. A stronger dollar tends to weaken foreign demand for dollar-denominated gold futures.

Powell also helped boost yields and the dollar while pressuring gold prices on Thursday when he told CNBC, “We think our policy stance is appropriate at the moment and we don’t see a strong case for moving in either direction.”

“We say in our statement of longer-run goals and monetary policy strategy that the Committee would be concerned if inflation were running persistently above or below 2%.”

“And in this case, as we look at these readings in the first quarter for core, we do see good reasons to think that some were or all of the unexpected decrease may wind up being transient,” he added.

Daily Forecast

Unless there is a huge miss to the downside in the U.S. Non-Farm Payrolls for April, there should be little in the news that could boost gold prices. Gold traders want to see a weak report because they want to see that rate cut forecast put back on the table. If the jobs market continues to strengthen then this will be highly unlikely.

Non-Farm Payrolls are estimated to have risen 180k. The unemployment rate is expected to come in unchanged at 3.8% and Average Hourly Earnings are expected to have risen 0.3%.



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