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James Hyerczyk
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Comex Gold

Gold futures are trading flat on Friday with gains being capped by firm U.S. Treasury yields. A slightly lower U.S. Dollar is helping to underpin prices. The mostly sideways-to-lower price action this week suggests investors are still uncertain over the U.S. Federal Reserve’s next moves regarding the tapering of its economic support measures.

At 11:06 GMT, December Comex gold futures are trading $1796.60, down $3.40 or -0.19%.

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Gold continues to straddle a pair of 50% levels. This indicates it’s balanced, or “not too hot, or not too cold”, given the current set of fundamentals. The short-term 50% level is $1800.00. The long-term 50% level is $1795.00.

Sooner or later, the Fed will have to make its decision and trader reaction to these two levels will tell us if their move is perceived as bullish or bearish.

Since the economic stimulus is not going to go on forever, the upside potential will be limited. The downside potential is huge, given the location of the nearest support.

Initial Claims Data Pushes Yields Higher, Weighing on Gold Demand

U.S. Treasury yields rose on Friday morning, after the number of weekly jobless claims fell to a pandemic-era low. The yield on the benchmark 10-year Treasury note added 2 basis points, climbing to 1.324%. The yield on the 30-year Treasury bond rose by 2 basis points to 1.921%.

Data from the Labor Department on Thursday showed the number of jobless claims filed the week ended September 4 fell to 310,000, the lowest since the coronavirus pandemic took hold. Economists surveyed by Dow Jones had forecast a print of 335,000.

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Risk Currencies Push Safe-Haven Dollar Demand Lower

The U.S. Dollar edged lower on Friday as pro-growth currencies gained following a rise in the Chinese Yuan to a one-week high on news that U.S. President Joe Biden and Chinese leader Xi Jinping spoke for the first time in seven months.

The greenback was also pressured by a stronger Euro after the European Central Bank said it would trim emergency bond purchases over the coming quarter, as widely expected.

Daily Forecast

We’re going to stick with our short-term outlook until proved otherwise. Look for an upside bias on a sustained move over $1800.00. However, gains are likely to be limited.

A downside bias will develop on a sustained move under $1795.00. If this attracts enough downside momentum then look for a plunge into $1757.40 to $1738.60.

In economic news, the August U.S. Producer Price Index is due to be released a 12:30 GMT. It is expected to show a gain of 0.6%, down from 1.0% in July. The Core PPI is expected to show an increase of 0.5%, also down from 1.0%.

The PPI tracks the changes in selling prices received by domestic producers for their output and is one measure of inflation, which is another economic indicator being used by the Fed to determine its timeline for any changes to its policy.

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