Price of Gold Fundamental Daily Forecast – Fed May Have to Fill Gap Left by Lower Fiscal Stimulus Hopes

Gold futures are trading higher on Friday, following through after yesterday’s price spike changed the main trend to up on the daily chart. The current upside momentum generated by the move suggests the market may be headed into $1970.10 to $1998.20.

The precious metal is in a position to post its best week in more than three months as the U.S. Dollar slid to its lowest level since September 1. The green back is being pressured by uncertainty surrounding the U.S. election outcome, with bets for continued pandemic-led stimulus and accommodative monetary policy bolstering bullion’s appeal.

At 13:39 GMT, December Comex gold is trading $1958.60, up $11.80 or +0.61%.

Fed May Have to Bailout the Politicians

Traders are still hoping for fiscal stimulus, but hopes are fading for a big coronavirus-aid package due to a divided Congress. This is driving up expectations the U.S. Federal Reserve might need to fill the gap.

“The outlook for gold is positive,” said Michael Hewson, chief market analyst at CMC Markets UK, citing the political uncertainty weighing on the dollar.

“It could get messy … The U.S. Federal Reserve is likely to be much more interventionist as a result, because politicians will be too busy squabbling, and the dollar will continue to fall.”

Bank of China International analyst Xiao Fu added, “The macro environment is supportive for gold because no matter what the (election) outcome, monetary policy is likely to stay supportive and accommodative because economic activity remains fragile due to the rising COVID-19 numbers.”

Economic News

Non-Farm Employment Change showed the economy added 638K jobs in October, higher than the 595K estimate. The previous month was also revised higher.

The unemployment rate also plunged to 6.9%, well below the 7.7% forecast. On the downside, Average Hourly Earnings came in below expectations at 0.1%. Traders were looking for a rise of 0.2%.

Daily Forecast

Gold traders are going to continue to monitor the movement in long-term yields and equities. A large decline in long-term Treasury yields due to expectations for less fiscal spending, combined with a rally in equities and other assets, has placed the dollar under consistent selling pressure that is likely to continue. This should bode well for higher gold prices.

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