Price of Gold Fundamental Daily Forecast – Hurricane Impact on Economy, North Korean Worries Propel Gold to One-Year High

Gold rose to a one-year high on Thursday after the U.S. Dollar tumbled in response to weak U.S. jobs data and an unchanged growth and inflation outlook from the European Central Bank.

December Comex Gold futures settled at $1350.30, up $11.30 or +0.84%.

Weak U.S. unemployment data pushed the odds for a rate hike sharply lower. The Fed cannot be comfortable with a weaker jobs market and the fact that the worst is still to come due to the possibility of rising unemployment in Texas because of Hurricane Harvey and in Florida with the onslaught of Hurricane Irma.

Gold was also supported by a surge in the Euro in response to the ECB outlook for lower growth and inflation. Safe-haven demand for gold also continued due to rising concerns over North Korea and the strong possibility of another nuclear weapons test on Friday.

Lower demand for higher risk assets and lower Treasury yields also drove up demand for safe-haven assets like gold and the Japanese Yen.  Gold rallied after U.S. and German government yields declined on the back of the ECB decision to keep rates at record lows.

On Thursday, the ECB kept rates at record lows and confirmed that asset purchases would continue at least until December. Draghi reiterated, however, that policymakers would decide on tapering this autumn, adding:  “Probably the bulk of these decisions will be taken in October.”

In U.S. economic news, the number of Americans filing for unemployment benefits jumped to its highest level in more than two years last week amid a surge in applications in hurricane-ravaged Texas, but the underlying trend remained consistent with a firming jobs market.

According to the U.S. Labor Department, initial claims for state unemployment benefits soared 62,000 to a seasonally adjusted 298,000 for the week-ended September 2, the highest level since April 2015.

In other news, Revised Nonfarm Productivity came out at 1.5%, higher than the 1.3% forecast. This is actually a negative because the report is an efficiency index. Revised Unit Labor Costs came in lower than expected at 0.2%. Traders were looking for a read of 0.3%.

IBD/TIPP Economic Optimism was 53.4, better than the 53.1 forecast and 52.2 previous read.

Forecast

Gold continued to surge early Friday as the dollar hit its lowest level since January 2015. Lingering North Korean tensions also helped propel gold prices. Buyers are likely to continue to be driven by lower interest rates and a drop in demand for risky assets like stocks.

Both Treasury yields and stocks are likely to be negatively influenced by the impact of hurricanes Harvey and Irma on the U.S. economy. This will be supportive for gold.

Traders are also buying gold in anticipation of another nuclear weapons test by North Korea this week-end. If this occurs then gold could soar early next week.

In economic news, traders will get the opportunity to respond to a speech from FOMC Member Patrick Harker, Final Wholesale Inventories and Consumer Credit.

As late as last June, Philadelphia Federal Reserve Bank President Patrick Harker said that the U.S. central bank remains on track to meet its inflation goal and reiterated his support for two more rate hikes this year. Given recent information on inflation, Harker is likely to give a dovish speech. This should put further pressure on the U.S. Dollar.

If Harker remains hawkish then this may trigger a short-covering rally.