Price of Gold Fundamental Daily Forecast – Jobs Report Could Fuel Volatile, Two-Sided Reaction

Gold futures are edging lower on Friday, pressured by a stronger U.S. Dollar, rising interest rates and increasing appetite for higher risk assets. The market is trading inside yesterday’s wide range, which suggests investor indecision and impending volatility. Volume is light ahead of the release of Friday’s U.S. Non-Farm Payrolls report at 12:30 GMT that should set the tone for the session today.

At 06:46 GMT, June Comex gold is trading $1292.30, down $2.00 or -0.15%.

On Thursday, gold broke sharply after strong U.S. economic data and dovish European Central Bank minutes drove up demand for the U.S. Dollar. The catalyst in the U.S. was weekly unemployment claims which hit their lowest level since 1969. In Europe, the ECB said it moved toward more stimuli because it saw risks to the Euro Zone economy. Furthermore, the single-currency fell after Italy cut its growth forecasts.

Also keeping a lid on gold prices is a positive outlook for U.S.-China trade relations. According to official state news website Xinhua, Chinese Vice Premier Liu He said a new consensus has been reached between China and the U.S. on the text of a trade agreement that they are negotiating.

Chinese President Xi Jinping, through a message conveyed by Liu, told Trump that both sides have made new and substantial progress on key issues regarding trade in the past month, according to Xinhua. Xi said he hopes both sides will continue to work together to conclude talks on the trade text as early as possible, Xinhua reported.

Finally, President Trump said on Thursday that “we’ll know over the next four weeks” if the two countries have a deal.

As far as the Non-Farm Payrolls report is concerned. Here’s what investors are expecting. The Non-Farm Employment Change is expected to show the economy added 172,000 jobs in March. The Unemployment Rate is expected to remain at 3.8%. Average Hourly Earnings are expected to have risen by 0.3% for the month.

Daily Forecast

Gold is currently sitting unchanged for the year. This suggests that today’s jobs report will either turn the market higher for the year, or drive it lower. It’s really a bet on whether the labor situation is strong despite recent setbacks in other components of the economy. The only thing we’re counting on is heightened volatility. Given the three parts of the reports, we can expect multiple swings in gold prices.

If the entire report is bullish enough to signal a stable or improving economy then gold price could tumble if the numbers drive Treasury yields and appetite for risk higher.

Gold could rally if the report is bearish enough to drive rates and appetite for risk lower.

The wildcard will be the U.S. Dollar because we can’t be certain about the number of dollar longs holding hedges against an economic turndown. It is possible that a bullish report drives the dollar lower as investors dump their long hedges. If this occurs then gold prices could rise.

Our work suggests that the bias in gold is to the downside. This would suggest the report is going to fuel a rally in the U.S. Dollar. And if that’s the case then look for a plunge in gold prices. However, be prepared for heightened volatility, and two-sided price action before gold traders settle on a direction. Technically, due to short-term oversold conditions, don’t be surprised if we see a closing price reversal bottom today.

Fundamentally, I can’t find any reason to want to hold long gold positions at this time. Therefore, the technicals are likely to control the price action.