Price of Gold Fundamental Daily Forecast – Gold Firms after Surge in Euro Drives Dollar Index Lower

Gold futures are trading slightly higher on Friday shortly before the regular session opening. The market is also trading inside Friday’s range after failing to follow-through to the downside following yesterday’s steep drop. The price action suggests that Thursday’s sell-off may have been an over-reaction to yesterday’s better-than-expected U.S. economic data.

Helping to drive prices higher on Friday is the reversal to the downside by the U.S. Dollar Index. The dollar tumbled against a basket of currencies on a move dealers said may be driven by anticipated currency demand arising from a Japanese bank’s plans to purchase a German multi-billion aviation finance business.

Dealers said speculators were buying the Euro in response to reports on Mitsubishi UFJ Financial Group’s planned purchase of the aviation financing business of Germany’s DZ Bank. As of June last year, the portfolio of that business stood at 5.6 billion Euros.

The transaction was announced on March 1 and MUFG said the transaction was expected to close after June.

At 10:18 GMT, June Comex gold futures are trading $1297.30, up $4.00 or +0.31%.

Weekly Jobless Claims

On Thursday, the government reported that the number of Americans filing applications for unemployment benefits dropped to a 49-1/2 year low the week-ending April 5. The news signaled sustained labor market strength that could dim expectations of a downturn in economic growth.

The U.S. Labor Department said initial claims for state unemployment benefits fell 8,000 to a seasonally adjusted 196,000 for the week-ended April 6, the lowest level since early October 1969. Economists were looking for an increase to 211,000 in the latest week.

The report represented the fourth straight week of declines. Furthermore, data for the prior week was revised higher by 2,000.

Additionally, the four-week moving average of initial claims, considered a better measure of labor market trends as it levels out week-to-week volatility, fell 7,000 to 207,000 last week, the lowest level since early December 1969.

U.S. Producer Price Index

The U.S. Labor Department said on Thursday that U.S. producer prices increased by the most in five months in March, but underlying wholesale inflation remained subdued.

The Producer Price Index for final demand rose 0.6 percent last month, lifted by a surge in the cost of gasoline. That was the largest increase since October 2018 and followed a 0.1 percent gain in February.

In the 12 months through March, the PPI rose 2.2 percent after advancing 1.9 percent in February. Economists estimated the PPI would climb 0.3 percent in March and increase 1.9 percent on a year-on-year basis.

The Core PPI increased 2.0 percent in the 12 months through March. That was the smallest annual increase since August 2017 and followed a 2.3 percent rise in February.

Daily Forecast

It’s another light report day in the U.S., but traders will be given the opportunity to react to the latest data on Import Prices, Preliminary University of Michigan Consumer Sentiment and Preliminary University of Michigan Inflation Expectations.

Based on the current price action, the direction of gold the rest of the session will be determined by the movement in the U.S. Dollar Index, which is being driven lower by the strong rally in the Euro.

Look for gold prices to continue to rise until the Euro stops moving higher. It’s being driven by a short-term event so the rally is not expected to be long-lasting. Gains are likely to be limited because yesterday’s economic data dampened concerns over a slowing U.S. economy.

Furthermore, gold traders are also likely to react to investor appetite for risk. Quarterly earnings season begins today. Gold could feel some pressure if stocks rise on good news.