Price of Gold Fundamental Daily Forecast – Low Yields, Weak Dollar: Gold’s Best Friend

Gold futures are trading mixed on Friday as investors booked profits following yesterday’s steep rally. The early price action suggests the rally may have been overdone. However, it was probably the right move because Treasury yields plummeted, the U.S. Dollar broke sharply and the stock market plunged. So are we looking at the start of a long-term move, or just a knee-jerk reaction to the unexpected news on Thursday?

At 09:35 GMT, December Comex gold is trading 1448.00, up $15.60 or +1.10%.

Shorts covered and aggressive speculators piled into gold on Thursday after President Donald Trump announced new tariffs on Chinese goods.

Trump said in a series of tweets the tariff will be imposed on $300 billion worth of Chinese goods. The levy will take effect September 1. He added later in the day those levies could go up to 25%. Trump’s comments came after a U.S. delegation met with Chinese trade officials earlier this week.

The yield on the benchmark 10-year Treasury note plummeted to its lowest level since 2016 in response to the news. Low yields tend to make gold a more attractive asset.

Daily Forecast

With the steep drop in Treasury yields, Fed fund futures are now fully pricing two additional 25-basis point rate cuts by the Fed this year. This news is potentially bullish for the gold. On Wednesday, the Fed cut rates 25-basis points as widely expected. However, investors were confused by remarks from Fed Chair Jerome Powell.

To clarify, Powell never said the central bank wouldn’t lower rates in the future. He just wanted to emphasize the current cut was “insurance”. The reaction to the new tariffs is why the Fed needed to make the cut and probably more.

Traders are now bracing for a big day on the economic front although these reports aren’t likely to matter much to the Fed, given the impact of the new tariffs. The Fed knows it has to cut again in September.

At 12:30 GMT, traders will get the chance to respond to U.S. labor reports. Non-Farm Employment Change is expected to show the economy added 164K jobs in July. Average Hourly Earnings are expected to have risen by 0.2% and the Unemployment Rate is expected to have dipped to 3.6%.

The U.S. Trade Balance is expected to come in at -54.2 billion, better than the previously reported 55.5 billion.

At 14:00 GMT, Revised University of Michigan Consumer Sentiment is expected to rise slightly to 98.5 and Factory Orders are expected to come in at 0.6%

Traders are now awaiting countermeasures from China that could send gold prices even higher.

On Friday, China’s foreign ministry pushed back against President Trump’s latest tariff threat, reportedly saying the world’s largest economy should give up its illusions, shoulder some responsibility and come back to the right track on resolving the trade war.

China’s spokesperson at the foreign ministry, Hua Chunying, said at a daily press briefing that Beijing would have to take countermeasures if the U.S. was committed to putting more tariffs on Chinese goods, Reuters reported.

She added that while China did not want a trade war with the U.S., it was not afraid of fighting one.