Price of Gold Fundamental Daily Forecast – May See Position-Squaring Ahead of Friday’s Jobs Report

Gold futures are trading slightly better on Wednesday, but retreating from today’s earlier high. Yesterday’s low at $1282.00 and today’s early rally suggests investors are coming in to defend the January 24 main bottom at $1281.50. The catalysts behind the early strength may be lower Treasury yields, weakening equity prices and oversold technical conditions.

At 11:48 GMT, April Comex gold futures are trading $1286.60, up $1.90 or +0.15%. Earlier in the session, the market reached a high of $1291.80.

Today’s price action also suggests investors may have found a temporary value zone after a week-long plunge. However, the muted reaction to finding support also suggests investors may be waiting for a new catalyst to trigger the next rally.

The recent spike in Treasury yields combined with the sharp rise in the U.S. Dollar and stock market rally, took its toll on gold prices. These three factors gave investors an excuse to book profits, while scaring some of the weaker longs into bailing out on the fear of a shift in investor sentiment.

Daily Forecast

Mixed fundamentals and the fear that the economy may be strong enough to handle at least one rate hike by the Fed before the end of the year may be putting a lid on gold prices at this time. Furthermore, the unexpected strength in the U.S. Dollar may be causing investors to take to the sidelines while they assess future Fed policy.

The charts show that investors have been selling aggressively since a report last Thursday showed unexpected Gross Domestic Product growth. This coupled with steady-to-strong reports like yesterday’s New Homes Sales report and ISM Services PMI along with last week’s testimony by Fed Chair Jerome Powell suggest a resilient U.S. economy. This is not what bullish gold investors were expecting, leading them to sell their long positions, while they reassess the situation.

Furthermore, gold traders are a little nervous over this Friday’s U.S. Non-Farm Payrolls report since the Fed believes a strong labor market is one factor providing the strength in the economy.

If there is a rally today then it will likely be fueled by position-squaring ahead of the jobs report. Uncertainty over U.S.-China trade relations could provide additional support. Furthermore, we may not see another prolonged rally in gold unless the trade deal blows up and both parties walk away from the negotiation table.