Price of Gold Fundamental Daily Forecast – Grim Economic Data Boosts Demand

Gold prices are trading slightly better shortly after the regular session opening and the release of reports on U.S. jobless claims, building permits and housing starts. The price action is being influenced the movement in the U.S. Dollar and the U.S. equity markets.

The dollar is trading firmer because of safe-haven buying. Stocks are posting a two-sided trade as investors try to figure out the impact of the economic reports.

If investors decide that today is going to be a “risk-off” day then look for the U.S. Dollar to rise. A stronger dollar will weigh on foreign demand for dollar-denominated gold. Additionally, with risk off, stocks will become less-desirable. This should also weigh on gold prices.

At 15:00 GMT, June Comex gold is trading $1754.90, up $14.70.

During these volatile times, gold and stocks have been moving in the same direction. Under normal market conditions, then tend to move in opposite directions or one clearly outperforms the other. Since early March they have been moving in the same direction.

Short-term traders should expect volatility and two-sided trading. Long-term traders can be a little more patient on downswings because the outlook if bullish. They don’t have to chase prices and can wait for the market to fall back into value area.

The main factor supporting gold at this time is the tremendous amount of stimulus from central banks and the extraordinary amount of fiscal stimulus from governments.

U.S. Economic Data

Unemployment Claims

Protection measures against the coronavirus continue to tear through the employment ranks, with 5.245 million more Americans filing first-time claims for unemployment insurance last week, the Labor Department reported Thursday.

That brings the crisis total to just over 22 million, nearly wiping out all the job gains since the Great Recession.

The total was a bit worse than the 5 million expected from economists surveyed by Dow Jones.

Housing Starts and Building Permits

U.S. home-building activity collapsed in March as the coronavirus spread, with housing starts tumbling 22.3% from a month ago.

The Commerce Department said Thursday that groundbreaking occurred last month as a seasonally adjusted annual rate of 1.2 million units, down from a 1.56 million pace in February. Construction of single-family houses fell 17.5%, while apartment and condo starts were off 32.1% from a month ago.

The drop in housing starts was the worst monthly decline since the 1980s, when new home construction plunged 26.42% in March 1984.

Building Permits came in at 1.35M versus a 1.30M estimate

Housing Starts were 1.22M, below the 1.31M forecast. The previous month was revised lower to 1.56M.

Philly Fed Manufacturing Index

The Philadelphia Fed manufacturing index in April dropped to -56.6 after registering -12.5 in March. This is the lowest reading since July 1980.