Price of Gold Fundamental Daily Forecast- Increased Demand for Risk Drives Gold Prices Lower

Gold prices spiked to their lowest level in nearly seven weeks in reaction to the same factors that drove prices lower in September. These factors are rising U.S. Treasury yields, a stronger U.S. Dollar and increased demand for higher-risk assets.

In trading early Monday, U.S. Treasury yields took out last month’s high which indicates the upside momentum created last month is still present. Rising yields made the U.S. Dollar a more attractive investment. Despite rising interest rates, U.S. stocks posted strong gains on the opening. Stock investors are bullish on the economy and highly supportive of the Trump Administration’s tax reform plan. An easing of tensions over North Korea is also helping to underpin stock prices.

The key economic data this week is Friday’s U.S. Non-Farm Payrolls report. The main concern for the Fed will be the Average Hourly Earnings. It is supposed to come in 0.3% higher. If it meets or exceeds expectations then this will solidify the December Fed rate hike.

Fed Chair Janet Yellen is also scheduled to speak on Wednesday. Traders will be listening for clues on monetary policy and inflation. Last week, Yellen drove up the odds of a rate hike later this year when she delivered hawkish remarks.

On Monday, investors will get the opportunity to react to a slew of U.S. economic data and a Federal Open Market Committee Member.

The major report is ISM Manufacturing PMI. It is expected to come in at 57.9, down slightly from the previous 58.8.

Minor reports include Final Manufacturing PMI, Construction Spending and ISM Manufacturing Prices.

FOMC Member and President of the Federal Reserve Bank of Dallas Robert Kaplan is scheduled to speak at 1800 GMT.

On September 5 before the September 20 Fed meeting, Kapan said the Federal Reserve should not raise interest rates for the time being.

“I actually believe we should be patient here,” said Kaplan.

He also repeated his view, widely shared among his colleagues, that the Fed should start to trim its $4.5 trillion balance sheet as soon as possible so that it can ensure it has “dry powder” to deal with a future crisis and recessions when it comes along.

On September 22 after the Fed meeting, Kaplan said he is open to raising short-term interest rates later this year, but will want to watch how the economy performs for a while before making a decision.

“I’ve got an open mind about December, but I want to take a little bit more time” to observe economic data, said Kaplan, referring to the Fed’s final scheduled policy meeting of the year, on December 12-13.

If Kaplan holds his ground, I don’t expect much of a reaction by the U.S. Dollar or gold prices today.