Price of Gold Fundamental Daily Forecast – Investors Focused on Yields, Dollar; Jobs Data is Old News

Gold futures are trading lower on Friday shortly before the release of the latest U.S. Non-Farm Payrolls report at 13:30 GMT. The report is not expected to have much of an impact on gold prices with most investors focused on firming U.S. Treasury yields and the oversold U.S. Dollar.

At 12:44 GMT, February Comex gold is trading $1888.30, down $25.30 or -1.32%.

Over the short-run, gold could see further downside pressure if yields continue to rise along with the U.S. Dollar, making dollar-denominated gold a less-desirable asset.

Basically, non-interest paying gold is weakening as investors shuffle money into bonds which do pay interest. It’s a money thing and has little to do with forecasts for additional fiscal and monetary stimulus. It’s all about portfolio managers locking up the first 1% yield since March 2020.

What’s Driving the Price Action This Week?

The benchmark 10-year bond yield scaled a fresh high for the first time in 10 months, holding above 1%, and helping the dollar rebound strongly.

A stronger dollar makes bullion more expensive for holders of other currencies, while higher bond yields increase the opportunity cost of holding the non-interest yielding gold.

Democrats’ control of the U.S. Senate has fueled hopes of large stimulus measures and boosted inflation expectations, underpinning gold’s appeal as an inflationary-hedge.

But higher inflation expectations and bond yields have also bolstered Federal Reserve officials’ hopes that the central bank’s new monetary policy approach is taking hold.

US Non-Farm Payrolls Report

U.S. Non-Farm Payrolls for December is due at 13:30 GMT, with the median expectations in a Reuters poll for +71,000 jobs, down from +245,000 in November. The Unemployment Rate is expected to inch higher to 6.8% from 6.7%. Average Hourly Earnings are predicted to rise 0.2%, lower than the previously reported 0.3%.

Daily Forecast

Contrary to popular belief and the headlines, traders are not really focusing on the U.S. Jobs report. It’s stale data and the job situation has probably worsened since the number of coronavirus cases have surged since the poll was taken. I could build a case for a reaction to negative job growth though.

Traders already know that the recovery is weakening and the need for fiscal and monetary stimulus is rising. Those factors have been driving the dollar lower for weeks. So we’re not looking for any surprises in the jobs report or any in the markets.

What has been hurting demand for gold is the stellar demand for riskier assets. Gold is an investment that doesn’t pay you anything to hold. Investors want returns – capital gains, dividends, interest – gold can’t offer that to investors at this time.

For a look at all of today’s economic events, check out our economic calendar.