Price of Gold Fundamental Daily Forecast – Jobs Report Could Be Win-Win for Gold Bulls

Gold futures are trading higher on Friday, moving to within striking distance of last week’s multi-year high at $1691.70. The market is also set for its biggest weekly gain since October 2011, following last week’s $82 plunge. Fears that the coronavirus outbreak could hit the global economy hard are catalysts behind this week’s price surge.

At 08:03, April Comex gold is trading $1673.30, up $5.30 or +0.34%.

April Comex gold is up over 6.25% so far this week as worries over the coronavirus sent investors scurrying for alternative assets. The move has been primarily driven by investors moving money out of equities into gold as well as the traditional safe-havens – U.S. Treasurys and Japanese Yen.

As we saw last week when stocks plunged over 10% and gold also fell $82 or close to 5.00%, gold is not a safe-haven asset, but rather a popular investment when interest rates decline especially toward zero-percent.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion. In other words, gold doesn’t pay a dividend or interest to hold it, but it will be worth more if global yields fall below zero percent. Getting paid zero is better than getting a negative return.

This week, gold was given an unexpected boost early in the week when the U.S. Federal Reserve made a surprise 50-basis point interest rate cut on Tuesday. The rally was further driven by speculators betting the Fed’s rate cut is likely only the first of multiple efforts to stem fear over the threat the coronavirus poses to global growth and financial markets.

No sooner had the U.S. central bank announced a half percentage point reduction than market participants began speculating about what was next. Wall Street broadly expects the Fed to follow up with another cut in a few weeks followed by more monetary easing in April, CNBC reported.

Both Citigroup and Bank of America Global Research expect the Fed to do at least 25 basis points more at the March meeting. BofA sees another similar reduction in April; Citi sees either 50 basis points in March or 25 basis points in each month.

Daily Forecast

Gold traders will be watching today’s U.S. Non-Farm Payrolls report closely. However, it may or may not have an impact on gold prices.

Traders are looking for the report to show the economy added 175K jobs in February. If it comes in as expected then gold prices could trade steady to better. This is because traders believe this data is stale news and mostly represents the job market before the coronavirus hit the United States. They are likely to increase bets that the labor market picture will soften in March.

If the number comes in much lower than expected, then look for gold prices to spike sharply higher because this would indicate the labor market was already starting to weaken in February and will only get worse in March.