Price of Gold Fundamental Daily Forecast – Higher-Than-Expected Wages Could Drive Prices Sharply Lower

Gold is trading slightly better early Friday but inside yesterday’s range. The price action suggests investor indecision and impending volatility. Traders are looking for clarity ahead of the possible announcement of new tariffs on China by the Trump administration, and the August U.S. Non-Farm Payrolls report. The latter could influence future Fed policy.

At 0810 GMT, December Comex Gold futures are trading $1205.20, up $0.90 or +0.08%.

A weaker U.S. Dollar is also helping to under gold prices. The dollar fell against the Japanese Yen after a report suggested that U.S. President Trump would next take up trade issues with Japan.

According to reports, President Trump told a columnist for The Wall Street Journal that he will take his trade fights to Japan next.

On Thursday, The Wall Street Journal’s James Freeman wrote about a phone call he received from the president, in which Trump “described his good relations with Japanese leadership but then added:  “Of course that will end as soon as I tell them how much they have to pay.’”

During the phone call, Freeman wrote, the president sounded “still very focused on eliminating trade deficits with America’s trading partners.”

Forecast

The early focus for gold investors will be the U.S. Non-Farm Payrolls report. The headline number is expected to show the economy added 191K jobs in August. This is up from 157K in July. The Unemployment Rate is expected to dip slightly from 3.9% to 3.8%. Average Hourly Earnings, a figures watched closely by the Fed, are expected to rise 0.2%, slightly below the 0.3% increase reported last month.

Gold could break sharply if U.S. Jobs data, Average Hourly Earnings in particular comes in near or above the target.

Traders will be watching the U.S. employment report for cues on the pace of interest rate hikes by the Fed. According to New York Federal Reserve Bank President John Williams, current economic conditions are “as good as it gets” for the U.S. central bank. He based his assessment on steady inflation and low unemployment which would allow the Fed to continue gradually raising rates.

The Fed has hiked two times in 2018 and is on course to lift rates twice more.

Essentially, the direction of the gold market will once again be determined by the direction of the U.S. Dollar. Expectations of higher interest rates are generally supportive for the dollar and bearish for gold prices. The announcement of new tariffs on China could also pressure gold if it sends investors into the dollar for safe-haven protection.