Price of Gold Fundamental Daily Forecast – Low Rates, Geopolitical Events Underpin Gold

August Comex gold futures are following through to the upside early Monday, following Friday’s strong surge. The market is trading at its highest level in over six week, boosted by a disappointing U.S. jobs report. Weaker U.S. Treasury yields pressured the U.S. Dollar on Friday which made dollar-denominated gold a more attractive investment.

On Friday, the U.S. government’s Non-Farm Payrolls report showed the economy added 138,000 jobs in May, well below the consensus number of 185,000. The unemployment rate decreased to 4.3 percent from 4.4 percent. Average hourly earnings came in slightly below expectations at 0.2 percent for the month.

Payrolls were also revised lower for April and March, suggesting the labor market was losing momentum despite the unemployment rate falling to a 16-year low of 4.3 percent.

Despite the weak report, the U.S. Federal Reserve is still expected to raise its benchmark interest rate by 25 basis points when it holds its two-day meeting on June 13-14. As of Friday’s close the market had priced in about an 83 percent chance of a Fed rate hike in June. However, some investors now believe the Fed will skip a September rate hike. At this time, the chances for a December rate hike stand at about 25 percent.

We’re likely to see volatility in the gold market leading up to the Fed’s interest rate decision. This is because U.S. Treasury traders believe the Fed is not going to raise rates multiple times like it forecast last December, but some Fed members believe the economy is still strong enough to handle multiple rate hikes.

After the jobs report on Friday, Philadelphia Fed President Patrick Harker said that the U.S. central bank remains on track to meet its inflation goal and reiterated his support for at least two interest rate increases this year.

In other news, according to the U.S. Commodity Futures Trading Commission, hedge funds and money managers raised their next long position in COMEX gold for the second straight week, hitting the highest level in nearly a month.

Forecast

August Comex gold futures closed in a strong position on Friday and with enough upside momentum to sustain the rally on Monday. If the upside momentum continues then its April high at $1300.30 will become the primary upside target.

Traders will get the opportunity to react to a few U.S. reports on Monday including Revised Nonfarm Productivity, ISM Non-Manufacturing PMI and Factory Orders, however, most eyes will be focused on geopolitical events including the impact of Friday’s jobs data on future rate hikes, the terrorist attack in London and the response by the U.K., and former FBI Director James Comey’s testimony before the Senate Intelligence Committee on June 8.